Occupation as Private Residence a Matter of Fact, Rules Tribunal

Private Residence Relief (PRR) is one of the most valuable reliefs against Capital Gains Tax (CGT). It exempts from charge gains made on the principal private residence of a UK taxpayer. PRR is often claimed by people who buy properties and live in them whilst improving them for sale or who wish to gain exemption from CGT by using a commercial or mixed-use property as their private residence for a period before sale.



The question of residence is a matter of fact in all cases, and the latest in a long sequence of tax cases has shown that mere occupation does not constitute residence.



The case involved a flat which was bought as an investment property in 1999. It was sold in 2008 and had only been occupied by the family claiming that it was their principal private residence for the last 25 days of ownership.



The taxpayers claimed that the wording of the relevant legislation, which states that it applies when the disposed property is ‘a dwelling house…which is, or has at any time in his period of ownership been, his only or main residence’, meant that the sale was exempt from CGT.



HM Revenue and Customs (HMRC) successfully opposed the claim, the First-tier Tribunal concluding that the family’s occupation ‘did not have a sufficient degree of permanence, continuity or expectation of continuity’ to justify the claim that the occupation was as their residence.



Where a building has periods of commercial and residential use, HMRC are increasingly arguing that PRR does not apply.