Can I claim PPR on both properties?

Question My partner (not married) and I have a house in the country which we jointly own.

We want to buy a flat in London that I would live in on a Monday - Friday basis for ease of commuting to work.

Can I claim this as my main residence and my partner claim the house in the country as hers so as to avoid CGT, although we will jointly own both properties?

Ian Says
Your current situation is that the house in the country is your principal private residence (PPR) for tax purposes.

This is owned jointly between yourself and your partner, and qualifies for PPR relief for her as well.

Buying a flat to live in Monday to Friday for just yourself complicates matters, as in theory this could become your PPR - an election to this effect must be submitted to the Inland Revenue within two years of purchase.

Off course, you can only have one PPR at a time and hence you would then lose the PPR exemption on your half share of the country property, subject to various rules and the 36 month rule in particular.

The other half of the London flat owned by your partner would also not have any PPR relief and hence would be chargeable to tax.

Whether a house qualifies as your PPR is also a question of fact, including where your centre of interests are and also where you are registered on the electoral roll, as well as looking at your personal circumstances.

In the circumstances, it may be difficult to prove that the London flat is your PPR and making the election may lead to CGT problems in the future for you. You would probably be better off electing the house in the country as your PPR and keeping matters simple.

You may also wish to consider looking at your IHT position and ensure you both have valid Wills in place - remember, partners do not inherit free of IHT so the death of either of you could result in hardship for the other.