There is no doubt which story has gripped the nation over the past fortnight – MPs’ expenses and how many have seemed to get away with expense claims that us mere mortals could never dream of.

One of the most high-profile politicians to fall under the media spotlight is Hazel Blears. She was found to have designated her London home as her main residence so as to claim second home allowances on her constituency home. However she told HMRC that the constituency house was her main home and therefore exempt from capital gains tax when it was subsequently sold at a profit.

Ms Blears insisted that she had fully complied with the tax system and that no capital gains tax was due on the house profit. This begs the question “what are the tax rules when you have more than one home and you sell one of them?”

Sections 222(5) and 223(1) of The Taxation of Chargeable Gains Act 1992 cover this area and state:
222(5) So far as it is necessary for the purposes of this section to determine which of 2 or more residences is an individual’s main residence for any period— (a) the individual may conclude that question by notice to the inspector given within 2 years from the beginning of that period but subject to a right to vary that notice by a further notice to the inspector as respects any period beginning not earlier than 2 years before the giving of the further notice.

223(1) No part of a gain to which section 222 applies shall be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual’s only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last 36 months of that period.

Therefore it would appear that, providing Ms Blears (or any other MP) notified HMRC that their constituency home was their main residence for tax purposes and that this remained the case throughout the ownership of that property (except the last 36 months when it will be deemed to have been their main home) then any gain on the property should be exempt from capital gains tax.

The rules on the sale of second homes do seem to be very generous compared to most other parts of the tax legislation. I will let the cynics amongst you speculate as to why there seems to have been little appetite to tighten up these rules!