ACCA Advanced Taxation (ATX) Practice Exam

What is the time frame for nominating a primary residence if a second property is acquired?

1. Within 12 months of acquisition

2. Within 18 months of acquisition

3. Within 2 years of acquisition

4. Within 5 years of acquisition

The correct answer is: Within 2 years of acquisition

The time frame for nominating a primary residence when a second property is acquired is within 2 years of acquisition. This is particularly relevant for tax purposes, especially concerning reliefs such as Private Residence Relief in jurisdictions like the UK. When an individual acquires an additional property, the tax legislation allows them a two-year window to make a formal nomination of which property will be treated as the primary residence. This is important because only one principal home can qualify for certain reliefs from capital gains tax (CGT) when it is sold. Within this two-year period, the individual can consider their living arrangements and any changes in circumstances that might affect their choice of primary residence. The option of nominating is designed to provide flexibility. It allows homeowners to adapt their nomination based on their living situations, accommodating factors like changes in employment, family circumstances, or personal preference between the properties. Properly utilizing this nomination can lead to more significant tax efficiencies when these properties are sold in the future. Recognizing the benefits and strategic planning that come into play with the two-year nomination period is crucial for effective tax planning in property ownership.