Second-home owners should be braced for curbs on “flipping”, according to tax experts who said the rules deciding which home was exempt from capital gains tax were likely to be tightened as part of the new government’s reforms.

The warning came as a campaign group representing first-time buyers stepped into the row over the planned CGT increase, urging the government to “stand firm for fairness” by discouraging speculation in the property market.

Priced Out, an affordable housing campaign group said: “Any U-turn to preserve tax breaks for buy-to-let investors or second- home owners would be a betrayal of first-time buyers and the wrong choice for future economic health.”

The row over MPs’ expenses last year highlighted the generosity of the existing rules, which have been modified over time to help people moving house to find work during a recession. The ability to nominate a CGT-exempt “main” residence along with a three-year “time to sell” grace period when no CGT was incurred has allowed many people to minimise tax bills on the sale of second homes.

John Whiting, tax policy director of the Chartered Institute of Taxation, a professional body, said: “I would be surprised if there was not a tightening around flipping… There is complete freedom at the moment. You can flip your holiday cottage for a day or a week and open up three years of CGT freedom.”

Francesca Lagerberg, head of tax at accountants Grant Thornton, said: “It’s clearly going to be on the agenda, not least because of MPs’ expenses. It is not avoidance planning, it is legitimate planning, but it is no longer as acceptable as it was.”

The proportion of the gain eligible for tax relief depends on how long a house was used as a main residence. The final three years of ownership always qualifies for relief even if the homeowner does not live there, as long as it was their only or main home at some point. Home owners will often write to the tax office to “vary” the property designated as their main residence a short time before selling it, in a bid to get three years of tax relief.

Advisers said the government was likely to consider tightening up the definition of a “main residence” and reducing the opportunities to allow those with more than one property to vary what counts as their main home. The three-year grace period was also likely to be examined.

Mr Whiting said the Treasury should consult on possible changes, rather than rushing them through. “There is such a history of chopping and changing on capital gains tax. These things need thinking about properly rather than another knee-jerk reaction.”

HM Revenue & Customs does not calculate the impact of redesignating properties to reduce tax bills on second homes. Earlier this year, a Treasury minister said: “HMRC apply a risk-based approach to investigating any cases where they suspect an individual has nominated a property as the main residence on a spurious basis.”

During last year’s expenses row, it emerged that many MPs were claiming expenses on properties that they described as second homes to the parliamentary fees office but as main residences to the tax authority. The Revenue said this practice could be legitimate “depending on individual circumstances”.

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