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Hypothetical at the moment - a married couple have a main residential home in both names. They decide to separate, husband moves into "project house", either a development or a new build. He spends 6+ months developing the property and decides to sell it. Would he be liable for capital gains tax, as this is now his residential home. He is still on deeds on original marital home but doesn't live there. What evidence would HMRC want to see to prove he has moved out of the marital home?
HMRC are not interested in personal living arrangements they are interested in what you own, if you own it they will tax it.
He would have to agree to cede his share of the ownership of the marital home to his wife so her name was the only one on the deeds. This is easily arranged through a conveyancer.
I think he want's to have his cake and eat it, not give his cake away ?
Would council tax bills + utility bill in husband's name be enough?
The risk here is that HMRC will classify this as a trading activity (not a Capital Gain) which would then give rise to charges for both Income Tax together with Class 2 and Class 4 NIC. This would especially be the case if the person building the house had not lived in it. The difficulty here is showing intent, in that it is intended to be a home to live in rather than an 'adventure in the nature of trade' as the Courts put it. This will be especially difficult since the couple have only separated and if the house has not been lived in then there is no tangible proof that it was ever intended to be the persons home.
If it is possible to get over that hurdle - which based upon the circumstances as outlined is an enormous hurdle to clear - then it would also be necessary to clearly demonstrate that the separation is real by possibly getting a formal Separation Order (speak to a divorce lawyer) and notifying HMRC that the new house is the persons main residence. HMRC may still challenge this, and they are now regularly making such challenges. It will be vital to be able to show that this is truly a main residence and not simply a foible. It will also be important to show a good and valid reason why the property has been sold e.g. moving out of the UK or marrying someone else and buying a home with them.
This would not be an easy task.
Nigel Reynolds FCCA CMgr FCMI
Property Tax Specialist
Reynolds and Co