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01 Jun 2009
How to avoid tax
The current controversy over MPs' expenses has highlighted the substantial tax advantages available from the "flipping" of second homes.
This is the tactic of telling HM Revenue & Customs (HMRC) that a second home is, in fact, your main residence, to avoid capital gains tax (CGT).
This tax break is still available to anyone who has a second home, and who has the means to fund relatively short- term property gains.
It has long been a premise of the UK tax system that an individual is allowed to buy and sell his or her main home free of CGT.
Capital gains are generated tax-free to allow movement up the property ladder and the accumulation of equity.
However, the ability to sell a second home, avoiding tax on all the recent capital gains, relies on a new bit of the tax law which was extended during the last recession to help individuals forced to move home to find work.