Second home owners are not well served by capital gains tax legislation, says Michael Waterworth
For capital gains tax (CGT) purposes houses are just like any other asset with one important exemption—that the gain on disposal of a person’s principal private residence is not subject to CGT. This exemption applies to a dwelling-house— which might comprise more than one building— and a garden or grounds of up to half a hectare which is about one-and-a-quarter acres. Where the size and character of the house justify it, gardens or grounds in excess of that area may be exempted.
To attract the principal CGT exemption the property must have been the taxpayer’s main residence and that connotes a “degree of permanence, continuity and the expectation of continuity” (see Goodwin v Curtis [1998] STC 475). A short stay will suffice to establish that a property is a main residence if a more permanent occupation was intended but prevented by changed circumstances, but even occupation of reasonable duration will not do if the occupation
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