Quality Not Quantity of Occupancy Determines Tax Position

For a property to qualify for private residence relief from Capital Gains Tax (CGT), it must in fact have been the taxpayer’s residence. HM Revenue and Customs (HMRC) are well known for contesting claims that the private residence exemption applies to a property if they think it may not have been, especially where multiple properties are owned.

A recent case before the Tax Tribunal was the result of HMRC raising a CGT assessment based on the profit a man had made on the sale of a property he owned in London.

The man claimed that the property qualified for exemption as his private residence. He had owned a number of properties in London and Hampshire over the decade before the property concerned was sold and, when he sold it, he still owned two other properties which he used and a further three letting properties which he had never occupied.

His case for exemption rested on the claim that he had occupied the property as his private residence for 52 days in 2006, after which time it was empty for two months and then let for nearly three years prior to sale.

The man’s evidence involved the common issues of family break-up and his moving from property to property. Important to his claim were that he had applied to pay council tax at the property and had a residents’ parking permit, which he surrendered after he moved out.

It was successfully argued that the man’s clear intention was that the property should be his home. It was also in point that he wished to live close to the let properties he owned, which were nearby.

His move to a different property after a relatively short period was occasioned by family circumstances and, importantly, during the period of occupation that he claimed justified the private residence exemption, he had no other property he could reasonably call his private residence.

It was the quality of his occupation, rather than its length, that proved critical.