Tax advice of the week: 'flipping' your second home
Jun 26, 2009
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'Flipping' second homes isn't limited to MPs, says Paula Hawkins in The Times – thousands of second-home owners have benefited from the rules too. However, these may be tightened up in the wake of the expenses scandal, so "anyone wanting to take advantage… may need to do so soon".
Flipping uses the 'time to sell' rules to avoid capital-gains tax (currently 18%) on the sale of a property that isn't a principal private residence (PPR). An owner can move out of a home, live elsewhere, but still elect it as their PPR for up to three years.
This, says Matthew Vincent in the FT, has helped many people, including newly wed couples who each own property, and amateur property investors.
For example, say accountants James Cowper, a man who buys a flat but elects his family home as his PPR within two years of buying it, can then sell the flat but switch his PPR election to it say a week before sale. That way up to three years' worth of gains are exempt from CGT. He then 'flips' his PPR election back a week later, so the only CGT due is on "one week's worth of gains on the family home".
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