The property market is starting to fizz again in some parts of the country, as pent-up demand built up during the lock-down is released. If your client is planning to move home, you should warn them about the nine-month rule.
For disposals made on or after 6 April 2020, only the last nine months of ownership can be deemed to be a period of occupation, so that portion of the gain qualifies for CGT main residence relief. This “final period” was previously 18 months, and it is still 36 months where the owner or spouse has moved into residential care, or is disabled.
Your client may be tempted to move into their new home before the old one is sold, but that could leave the gain on the old home exposed to CGT, if the delay in selling the old home exceeds nine months. However, where contracts have already been exchanged to acquire the new home, the gain arising on that property could theoretically be exposed to CGT if the delay to taking up residence is extensive.
The solution is found in TCGA 1992, s 223ZA, which legislates concession D49 with effect from 6 April 2020. Where the delay in moving into a property is due to construction of the building, renovations to the building, or a delay in selling the taxpayer’s previous residence, that delay can be a deemed period of occupation where it doesn’t exceed 24 months.
It may be better to delay the move into the new home, if the sale of the old home falls through and the whole marketing process has to start from scratch.
Where the family are concurrently occupying both homes, say the children are at the new residence in order to start new schools, don’t forget to make an election as to which home is considered to be the main residence.
Written by the Tax Advice Network