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A beginner's guide to home-flipping
The nation’s MPs have recently hit the headlines over their expenses, not least the practice of ‘flipping’ the designation of their first or second homes for financial gain, but according to one West Yorkshire tax adviser, the loophole can be exploited by any second home owner for a legitimate saving on tax.
Ripponden resident John Kinsella – a partner at Bradford accountancy firm Watson Buckle – said that while MPs have now bowed to political pressure and stopped indulging in the practice, it was still available to taxpayers who had second homes or buy-to-let properties that they had lived in and now wanted to sell.
The tax break was brought in during the recession of the early 1980s to help people who were forced to move from depressed areas to find work and could not sell their homes at the time. It meant they could rent out their property until the market recovered, and still not be taxed on the proceeds when a sale did eventually take place.
Mr Kinsella said: “People in the UK have always been able to buy and sell their own homes free of capital gains tax and where people have two homes, they can choose which is their main residence, for the purposes of tax-free status, simply by writing to the tax inspector.
“If an individual with two homes decides to sell one of them, it is possible to ‘flip’ the tax relief to the home which is to be sold. Even if the designation is flipped back a week later, the ‘time to sell’ regulations kick in for the following three years, and any gains made from the sale will be tax-free.
“It may be that the abuse of the system by MPs will lead to the government looking again at this tax break, but I hope that any changes do not disadvantage those it was designed to help – people who are perhaps struggling to sell their homes in the current recession.”
For more information, contact Watson Buckle on 01274 516700 or visit www.watsonbuckle.co.uk