Where a taxpayer has more than one residence (see Par. 2) for any period, the Inspector may reach agreement with him as to which of these is to be treated as his main residence, provided that the taxpayer gives notice in writing to the Inspector within two years of the beginning of that period (or by 5 April, 1976, if that is later). If a taxpayer owns one residence and has another in which his interest is not a chargeable asset (e.g., weekly rented accommodation or accommodation provided in connection with his employment) he may well be unaware of the desirability from his point of view of nominating as his main residence the house, etc., which he owns. In cases of this kind, when a disposal occurs, the taxpayer should be offered an extension of the time limit to a date which allows him a reasonable period to give notice under Section 604(8)(a) after his attention has been drawn to the possibility. Such a notice should be regarded as being as effective as if it had been made within the statutory two-year period.
Further notices in writing under Section 604(8)(a) to vary a previous agreement may be given, but each future notice is only effective for a period beginning not earlier than two years before it is given. Where, following a notice (or a further notice) agreement is reached, the taxpayer should be advised.
8
[19.7.3]
Example
In 1988, a person buys (and uses as his only residence) property A. In 1995, he buys a second property B, which he also uses as a residence but it is agreed with the Inspector that property A is his main residence.
In June, 2000 he contemplates selling property B at a substantial gain and because property A is not appreciating in value at the same rate, gives notice, and it is agreed, to have property B treated as his main residence. He should then be treated as if property B became his main residence in June, 1998 (i.e., two years before the second notice), and the gain should be apportioned in accordance with Par. 7.
If property A is later disposed of, the period of two years from June, 1998, should be excluded from his period of occupation of it as a private residence.
3.17 In default of agreement with the owner, the Inspector may determine which of the houses is the taxpayer’s principal private residence but the taxpayer has a right of appeal against the Inspector’s determination.
In practice, the Inspector should not give formal notice of determination until the question becomes material, and then only if agreement cannot be reached. He should consider the information in the taxpayer’s file (e.g., the address shown as the private residence in declarations on return forms, the address shown on dividend warrant counterfoils, etc.); and make any necessary enquiries of the taxpayer in an attempt to reach agreement.