Scottish Land & Estates has today said that proposals to remove the ability to choose a main residence for Capital Gains Tax purposes may unfairly disadvantage those in rural areas.
The proposals, part of a consultation issued by the UK Treasury to charge Capital Gains Tax on gains made by non-residents disposing of UK residential property, could see HMRC remove the ability of individuals to chose which home is considered to be their primary residence.
That may have a knock-on effect for those in rural areas who reside in an alternative location for work purposes but return to their other home at weekends and holidays. The position is more complicated where one spouse works away from home during the week and the family reside in the family home.
Douglas McAdam, chief executive of Scottish Land & Estates, said: “It is clear that the government is attempting to remove an anomaly in the current tax system, whereby UK residents are liable for capital gains tax in circumstances where non-UK residents are not, and to that extent we welcome their efforts.
“However, we would urge caution over the removal of the right for a UK resident individual to make an election for their main residence under the current rules.
“Many of our members, and others with rural properties, may spend more of their time in rented property due to work commitments near urban areas. Under the planned changes, they could face having to pay Capital Gains Tax on the property they own in a rural area but use less than they would wish to do so. This could also affect those who own a single property and rent another, rather than just those with second homes.
“We would ask the government to give serious consideration to this issue and we would make clear our unease at the record keeping implications of the possible changes HMRC are consulting on.
“Should the UK Government proceed with the removal of the election, then HMRC should allow proprietors to make a reasonable case based in a number of tests as to which property is their main residence rather than simply relying on a count of the number of days spent in each abode.”