Most homeowners do not have to worry about having to pay Capital Gains Tax (CGT) on the disposal of their home at a profit. For most people the biggest asset is their home and given the increase in property prices in recent years, their home is likely to make the biggest gain on sale. However provided that the property has been the taxpayer's 'principal private residence', they do not need to worry about CGT on the sale of their home, regardless of how large the gain made on it.
It is clear that the courts are tightening up on what property constitutes a person's 'principal private residence' and they are looking for a degree of 'permanence'. Proving the requisite degree of permanence can be difficult especially when a person has moved out of the matrimonial home on separation or divorce.
In a recent case, the taxpayer wrote to HMRC to try to explain his position and this letter proved fatal to his later attempt to claim the principal private exemption in relation to the sale of a property. He incurred a large tax bill. It is important to ensure that professional advice is taken prior to contact with HMRC. For more information on CGT matters go to: www.hmrc.gov.uk/cgt/
For advice please do contact us.