Currently if you own more than one property that is occupied as a home, tax rules allow an election to be submitted to HM Revenue & Customs (HMRC) advising which of the properties is your Principal Private Residence (PPR). Once made the election can then be changed in favour of another property occupied as a home. This allows an element of tax planning in terms of the Capital Gains Tax due when properties are sold due to PPR relief being available on each qualifying home.
At present non UK residents who reside in their UK properties for a limited number of days per year pay no UK Capital Gains Tax as they elect their UK home as their main residence. Due to this loss of tax HMRC are proposing that with effect from 6 April 2015, non UK residents will be liable to Capital Gains Tax (CGT) on disposals of UK residential properties. To implement this HMRC are planning to withdraw the current PPR election system and replace this with the need for the taxpayer to clearly demonstrate that the property is actually their home. Factors determining this are likely to be where the family is based, where children go to school etc.
The proposal could have a serious impact on individuals who occupy a flat in London for the working week returning at the weekends to be with the family at their property by the sea.
It is not clear at this stage how existing PPR elections are going to be dealt with but it is likely that careful planning will be required before a property is sold.
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