Proving your house is your home
You will almost certainly be aware of the exemption from capital gains tax (CGT) on the sale of your main residence, but did you know that the property concerned must actually be used as your home at least some of the time in order to qualify for relief? You do not have to live there permanently, as was illustrated by the MP’s ‘second home’ controversy, but some occupation is required.
When you claim the CGT exemption, HM Revenue & Customs (HMRC) may ask for documentary evidence of your occupation. This could be a TV licence registered at the address and the local council tax bills. If the period of occupation was brief, the utility bills for the property might be called for. Where the energy used at the address was very low, this could indicate that the property was unoccupied during the period concerned.
The tax exemption can still be claimed when you occupy two or more properties concurrently, but in that case within two years of acquiring the second or subsequent property you have to elect for one of the properties to be treated as your tax exempt home. You do can this by writing to your Tax Office. The election can be changed at any time once it is made, but in order to elect for a property to be tax exempt you must actually occupy the property for some of the time.
If you do not make an election, the tax inspector will try to determine which property you officially recorded as your main home. HMRC can ask banks and credit card companies to confirm which address was used for loan applications, and will want to know to which address your bank statements were sent.
Although there is a statutory period for which records must be retained, in the case of a property where exemption has been claimed it is better to keep them indefinitely (since an enquiry could go back 20 years if fraud is suspected). This should be easy enough to do if paperless (electronic) records are kept.