HMRC has launched a disclosure campaign aimed at those who have not declared tax on the sale of a property. To take advantage of the campaign, voluntary disclosure must be made by 6 September 2013.
Although primarily aimed at disposals of second and additional properties, disclosure of unreported gains that arise on sale of an individual's main home can also be made. In the majority of situations, the principal residence relief applies to reduce the gain arising on sale of an individual's main home to nil so no capital gains tax is due. However, it is worth bearing in mind some of the more common situations where the relief may not apply in full and so a tax liability may arise.
1. 'The multiple owner'. The relief is only available on an individual's only or main home. Those with two or more residences may want to consider which is their principal residence for these purposes. It is possible to choose the main residence by making an election, but this must be done within two years of any change in the combination of available residences.
2. 'The business owner'. Exclusive use of all or part of the property for business purposes can taint the availability of the relief and so care should be taken.
3. 'The absent owner'. For the relief to apply, the property needs to be occupied by the owner as their home. As such, periods of absence can lead to a restriction of the relief although periods of deemed residence can arise.
4. 'The land owner'. Gains arising on land which forms part of the residence is only excluded by the relief to the extent that it is within a "permitted area" of 0.5 hectares or, if larger, the owner can demonstrate that the size of the grounds is in keeping with the "size and character" of the property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
