How Long Does it Take to Establish a Property as Your "Main Residence"?

How Long Does it Take to Establish a Property as Your "Main Residence"?
14th December 2010

One of the most frequently questions a tax adviser gets asked is "how long do I have to live in a property before HMRC will accept that it is my "main residence" and thus exempt from capital gains tax when I sell it?" The question is fair but the answer is difficult...

Example

My own opinion is that there is no minimum period of time, and I give the example of someone who moves to a new city to take up a job and buys a small flat to live in. He moves in and starts the job but a week later he wins millions on the lottery. He resigns from his job, spends some of his winnings on a world cruise, and on his return he sells the small flat and buys a country house.

He only spent a week in that flat, but I defy HMRC to argue that it was not his "only or main residence" during that time, and thus exempt from capital gains tax (CGT) on any gain he might make when he sells it. The point is that he actually lived in the flat, and (until his lotto numbers came up a week later) he regarded it as his home.

HMRC, who seemingly make up the law as they go along, have for a long time tried to introduce the concept of a "temporary" residence, which does not qualify for exemption from CGT. There is no reference to "temporary" in the legislation but this has not deterred them from using a short period of occupation as a reason to seek to deny relief for a "main residence".

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