Case: Flat occupied for 10 weeks eligible for PRR

[2019] UKFTT 0300 (TC)

Judge Geraint Jones QC, Mr Duncan McBride

Decision released 20 December 2018

Capital gains tax – principal or main place of residence relief

Davidson [2019] TC 07128

Summary

Mr Davidson, the appellant, acquired a London flat in June 2008. Substantial refurbishments were undertaken and, when they had been completed, the flat was let until March 2011. He then lived at the flat with his partner for 10 weeks before moving out at the end of May. The property was then let again until 29 December 2012, whereupon it remained empty until it was sold in February 2013. HMRC contended that the appellant had never resided in the flat as his principal or main place of residence whereas the appellant argued that it had been his principal or main residence throughout the period of ownership.

When the property was acquired, the appellant already owned another London flat (in Whitehall) , but his business had been adversely affected by the financial crisis and therefore his intention was to buy another flat to live in in order to be able to let the already modernised Whitehall flat which he thought would generate a substantial return. However, by the time the work had been completed on the new flat, his financial affairs had worsened, so he also let out the new flat and lived in temporary accommodation until he could afford to move into it with his partner. Although he intended to live in the flat long-term, soon after moving there relations with his partner deteriorated to such an extent that incidents of domestic violence were reported to the police and the appellant no longer felt secure living there. Both he and his partner moved out. There was limited external evidence available – the appellant was registered on the electoral roll in Derbyshire where he also had a property used at weekends, he was not registered with a London doctor and had never notified the DVLC that he had moved out of Whitehall (although this flat was also let).

The FTT acknowledged that the onus was on the appellant to demonstrate, on the balance of probabilities, that the property was his main residence and that it would be relevant for them to consider external indices of expected continuity of residence. However, the outcome of the case turned largely on their assessment of credibility, and on this basis they found as a fact that the during the period of ten weeks beginning in March 2011, the property was occupied as a main residence because, notwithstanding the brevity of the period, the intention had been for it to be a long-term home. However, it had not been the appellant’s main residence at any time prior to March 2011 and ceased to be his main residence when he moved out, never becoming his main residence again.

Comment

Although the appellant had argued that the property was his only or main residence throughout the whole period and the FTT found that this was only the case for 10 weeks out of the 4 2/3 years of ownership, presumably the consequence would be that private residence relief was available for the final three years of ownership under TCGA 1992, s. 223(1) (as the disposal took place before 6 April 2014), therefore the majority of the gain was exempt.

For commentary on the occupation of property as a residence for private residence relief purposes see In-Depth at ¶545-200.

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