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Reside or Residence?

Changing your Principal Private Residence (PPR) can provide you with some great tax saving benefits when you come to sell your property. However if you are only looking to reside in the nominated property for a short period of time you must ensure you have enough evidence to demonstrate that a property has become a residence.

HMRC recently won a case where an elderly couple had purchased a house which needed large renovation works. The couple gained planning permission and their intention was to move into the property following the completed works. They were also living in the property during parts of the week and spending the rest of their time with their daughter in London. Due to turbulent weather and high winds, the roof of the property collapsed making it unsafe and uninhabitable for the couple to reoccupy the property until renovation was finished.

Unfortunately before the work was completed, the husband fell ill and they were forced to sell the property. They claimed PPR relief on the sale for the period they were living there and the last 18 months which is automatically exempt. They lost the case with HMRC on the grounds that no change of address had been registered, no furniture or personal possessions had been moved in and they had not registered to vote or changed their doctor.

If you want to use your PPR then you should retain clear evidence to demonstrate that a property has become a residence, as soon as possible on moving in. This should include evidence of moving personal effects to the property, registering to vote, informing the DVLA, obtaining a TV licence and phoneline, changing doctors and children’s school etc. This will become particularly important where circumstances change and the property is only actually occupied for a short period.

The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.

Written by Callum Somers ACCA


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