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For example, a couple could live together with two homes, one owned by each of them, and both would qualify. It's only when you marry that you are restricted to one property. Even then, whether you are single or married and you buy a second home, you are entitled to elect which of them should be treated as your PPR. Most people assume that there is no point in making an election because your main home will automatically qualify and they assume that no relief will apply on the second home. This is wrong. Everybody in these circumstances should make an election within two years of acquiring the second property to say that their main house is their PPR. If, or when they come to sell the second home, they can then elect that the holiday home is their PPR for a period which can be as little as one week, but allow them to qualify for a capital gains exemption in respect of the last three years of ownership. So, if you owned a holiday home for 10 years, 30% of the gain would automatically be tax free. If it was a second home which you had let out for part of the time, you not only obtain relief for the last three years, but you can obtain up to £40,000 extra "Letting Relief" against your capital gain. For spouses, you can double this up because both are entitled to up to £40,000 Letting Relief if the property is held jointly.
Rather surprisingly, it is not just UK properties where this applies. If you buy a holiday home overseas such as in Spain, but you are a UK National resident in the UK, you can still be caught for Capital Gains Tax, but this does not prevent you from making an election in the way suggested above. The vital point is not to miss making an election within two yeas of the purchase because this allows you to change your mind later on.
Another way of doubling up relief applies if you have a convenient relative. For example, some people buy properties for an aged parent to live in, or for their children, perhaps when they are at University. If you proceed on that basis, there will be no extra capital gains relief. If, instead, you acquired the property in a trust with rules written into the trust that allow the relative to live in the property, you as Trustees can obtain PPR Relief on that second house. It doesn't matter that you might be the beneficiaries of the trust and pocket the profit when it is sold. The capital gains relief applies because your relative is living in the house as their home under the terms of the trust.
Most people are unaware of these opportunities and have bought properties without thinking about the tax consequences. By the time they come to sell the properties, it is often too late to do anything about it.
As always please feel free to call myself or Carlos on 966-426-185, or alternatively send an email to info@white-baos.com if you wish to discuss this or any other issue. Marc White LL.B. (English Solicitor). C/Diana 16, 1º, 03700 Dénia (located at the Glorieta Sq. end of Marques de Campo).
White & Baos abogados and solicitors, is a multi disciplinary law firm and handles both contentious and non-contentious matters. The main difference between our firm and others is the services we offer to non-Spanish clients, and in particular British clients, owing to the fact that one of the founding partners is a practising English solicitor registered with the Law Society of England & Wales. The need to understand English law as well as Spanish law is paramount in matters such as a divorce between British nationals or following the death of a British person in Spain, particularly where there are assets situated in the UK as well as in Spain
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