Tribunal considers private residence relief
One of the most used and valuable of the Capital Gains Tax (CGT) exemptions is available when the family home is sold. There is usually no CGT to pay when a property that has been used as the main family residence is sold. An investment property, which has never been used as a private residence, will not qualify for this principal private residence relief (PPR).
In a recently decided First-tier Tribunal case a taxpayer’s appeal against HMRC’s amendment to his Self Assessment tax return was denied. The amendment assessed CGT on the sale of a property which he asserted had been his home for a short period and therefore subject to relief as his principal private residence.
The property in question was described by the taxpayer as a ‘decent-sized’ two-bedroom semi-detached house with a garage at an address of 110 Heathlands. The taxpayer had purchased the house in November 2002 and had let it out until November 2006. Due to marital difficulties the taxpayer moved out of the matrimonial home and into the two-bedroomed property during November 2006.
The taxpayer’s contention that he lived at the property for a number of months on his own was accepted by the Tribunal. However, the taxpayer had a lady-friend who he subsequently married. The taxpayer gave evidence that‘it was around March or April 2007 that his relationship with this lady developed to the point that they decided that they would live together’. The Tribunal also heard that much of the taxpayer’s correspondence was sent to his lady-friend’s address rather than to his two-bedroomed property.
The Tribunal considered the evidence to support a claim for PPR relief on the subsequent sale of 110 Heathlands. The Tribunal was clear that from April 2007 at the latest the home ‘didnot have any degree of permanence or expectation of continuity’. The Judge in weighing up the facts concluded that the taxpayer‘never envisaged 110 Headlands as a long term home, and that his occupation there, as HMRC contends, lacked the degree of permanence, continuity or expectation of continuity to render his occupation of 110 Headlands ‘residence’ for the purposes of section 222 and 223 TCGA’. The taxpayer’s appeal was dismissed.
This case serves as an important reminder that property owners must establish evidence to support a claim that a property has, or was, used as their home if they are to be successful in claiming PPR when they sell the property. In this case the taxpayer was unable to prove that he intended the home to be a permanent residence and PPR was therfore denied.