When does a house become a home?

The issue

The principal private residence (‘PPR’) exemption is a valuable tool which gives relief from capital gains tax for a dwelling-house or part of a dwelling-house which is, or has at any time in the period of ownership been, the only or main residence.

But when does a house become a home, or indeed a residence?

In a recent case Mr & Mrs Core lived in the property for 6 – 8 weeks throughout their 15 month ownership but it was found by the First-tier Tribunal (‘FTT’) that the property was indeed their main residence.

Details of the case

The key facts of the case were:

1. In March 2013 Mr & Mrs Core purchased Green Lane. At the time they were living in a rented property on Victoria Road.
2. They did not move straight into Green Lane as they wished to undertake renovations on the property.
3. During the course of the renovations Mr Core fell out with the neighbours, the police were involved and the arguments became physical.
4. Between February and March 2014 Mr Core was approached several times with unsolicited offers to buy the property.
5. In March/April 2014 the Core family moved into Green Lane.
6. In May 2014 a final offer unsolicited offer was made and Mr Core accepted.
7. The family moved back to Victoria Road, the property on which they still had the lease.

The outcome

Mr & Mrs Core appealed to the FTT following an HMRC enquiry and the FTT agreed with the taxpayer.

The judge quoted the Court of Appeal case of Goodwin v Crutis which states whether the occupation amounts to residence is a question of fact; whether the nature, quality, length and circumstances of the occupation made it so.

As the Core family chose to move out of Victoria Road (on which they still had the lease) the judge found this was strongly indicative that they expected to live at Green Lane indefinitely. It was only the unsolicited offer in May 2014 which made them change their mind.

Forbes Dawson comment

Both HMRC and the taxpayer could offer little in the way of evidence for and against the occupation of Green Lane. We would always recommend any documentary evidence is retained.

The case reiterates that it is quality not quantity that matters for a PPR claim.

Due to the time the property was disposed, the entire gain was exempt due to the last 18-month rule. As this is now reduced to nine months a similar set of circumstance could use s223ZA TCGA 1992 (formally ESC D49) to exempt the otherwise chargeable renovation period, due to the house being subsequently occupied as a main residence.




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