Changes to private residence nomination rules.

Finance Bill 2015 will introduce changes in the rules on the nomination of an individual's private residence; the practice commonly known as "flipping". The changes will apply from 6 April 2015.

The private residence nomination rules enable an individual who owns two or more properties to nominate a property as their main residence, provided that they do actually occupy the property at some point.

The use of the rules gained widespread publicity in recent years when it came to light in the mainstream press that MPs were particularly fond of this practice and became known as flipping.

An advantage of flipping was that it enabled a taxpayer to obtain private residence relief on two properties for non-coterminous periods and, in particular, enabled private residence relief to be obtained for the final 36 months of ownership for two or more properties.  The final 36 months exemption has since been reduced to 18 months with effect from 6 April 2014.

With effect from 6 April 2015, there will be some new conditions that will apply in order for such an election to be effective.  These will mainly affect non-resident individuals who own homes in the UK, and UK residents who own homes in other countries.  

From 6 April 2015, a home can only be nominated as the taxpayer’s main residence for CGT purposes if:

  • It is located in the same country in which the taxpayer is resident for tax purposes, or
  • The taxpayer spends at least 90 midnights in the property in the tax year (or 90 days spread across all the properties the person owns in the country where the property is located).

Days spent in the property by the taxpayer’s spouse or civil-partner count as being occupied by the taxpayer, but days can’t be double counted.

The 90 days of occupation doesn’t have to be a continuous period. Where the property is owned for part of the tax year, the 90-day requirement is reduced proportionately to the part of the year for which the property was owned.      

Individuals who are not resident for tax purposes in the UK will have to meet this 90-day condition in order to nominate a UK home as their main residence.