Question: Selling the home and moving in with husband after five years: What is the tax position?
A couple who married five years ago and have not yet sold their properties to live together, have lived separately. After five years of living separately the wife, who had mobility problems due to an operation (and other problems) is now mobile enough to move in with the husband and sell her home. She has genuinely been living in her own home, has bills to prove it, diaries to show down to so much detail she knows which nights she spent at her property (the vast majority of them). The husband has been living in his own home. She is concerned that a taxable capital gain will arise for the married period of ownership (five years) as a proportion of total ownership as HMRC will argue that point (see HMRC’s Capital Gains manual: (www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64525). Are they both entitled to each of their private residence relief, and do you feel it would be a successful argument with HMRC?
Arthur Weller replies:
Answer: If you look at HMRC’s Capital Gains manual (at www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65300), it states: ‘Spouses or civil partners who are living together can have only one only or main residence between them, TCGA92/S222(6)’, but ‘spouses or civil partners who are separated are each entitled to relief on their own only or main residence’. The definition of 'living together' and 'separated' is given at CG22070. It seems to me that from what you have described HMRC would argue that this couple fell into the 'living together' category, and consequently would only eligible to one PPR between them (see CG64525).