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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: two or more residences: residences occupied under licence: invalid notices

CG64470 explains that an individual must have a legal or equitable interest in the residence for it to be a residence within the meaning of Section 222.

However prior to October 1994 we took a different view; that any property in which an individual lived was a residence. This had the result that where an individual occupied a residence under licence and also owned another residence, they could nominate which was to be treated as their main residence under TCGA92/S222 (5). This also meant that where an individual began or ceased to occupy a residence under licence, there was a change in the combination of residences which began a new period for making a nomination.

Our change in view was published in the October 1994 issue of Tax Bulletin. The Tax Bulletin set out what we would do in cases where nominations had been made in accordance with our previous view, but which were no longer valid as a result of the change in view. There are two reasons why such a notice could now be invalid,

  • the notice nominated a residence that was occupied under licence as the main residence

or

  • the notice was made following a change in the combination of residences held, but where the change in combination arose due to the individual beginning to occupy a residence under licence.

The treatment of any such invalid notices will depend on the date on which they were given, the basis on which they were made, and whether the person who has given the notice wishes for it to be disregarded.

  • Notices given after 16 October 1994 which rely for their effect on a residence being occupied under licence

The notice is invalid and should not be accepted.

  • Notices given on or before 16 October 1994 nominating a residence in which a legal or equitable interest is held

The notice should be treated as valid. The nominated residence is the main residence for the period covered by the notice.

  • Notices given on or before 16 October 1994 nominating a residence occupied under licence

The notice is treated as effective up to 16 October 1994, after which it ceases to be effective. If, after that date, there is only one residence in which a legal or equitable interest is held, that residence will be the only or main residence as of 17 October 1994.

Where there are two or more residences in which a legal or equitable interest is held at 17 October 1994, a new two year period for making a new notice will commence on that date. The new notice can only be effective from 17 October 1994 unless there was an earlier change in the combination of residences for which the two year period for making a notice has not yet elapsed.

  • Invalid notices where the person who made the notice wishes for it to be disregarded

We cannot insist that anyone is bound by an invalid notice. So where a notice relied for its effect on a residence occupied under licence, an individual may request that the notice be disregarded provided that any assessment dependent on that notice is not yet final.

Where the notice is disregarded the strict statutory rules must be applied to the whole period affected. This means that a revised notice cannot be substituted for the original invalid notice unless the time limit for making the original notice has not yet expired. Neither can the invalid notice be varied.