We are returning to the UK after nine years overseas and we would like to sell our UK house that was let for this period. We bought the property in 2003 and lived there until 2006 (worked overseas 2006-2008), returned to live in the property and then left the UK in 2011. How long would we need to be resident in the property for it not to be subject to capital gains tax (CGT)? If we rent a property in a new area where we would like our children to start school, would this mean that this would no longer be our primary residence?
Arthur Weller replies:
If you return to live in the property as your qualifying main residence, it is possible that if you then sold the house there would be no UK CGT. Firstly, to make the property your qualifying main residence you would have to live in the property fully for maybe six months to a year (although this is a grey area). Secondly, you would need to establish that the nine years abroad were a qualifying period of absence (for example, either you or your spouse was in employment abroad, as you will see in HMRC’s Capital Gains manual, (link here). If you could not come back to live in your original house because your new employment when you came back to the UK required you to live in a different area, the rules deem that you are seen as fulfilling the conditions for a qualifying period of absence (see CG65046 and CG65067 there). I do not know what HMRC would say in a case where someone could not live in the original house due to their children's education.