When assessing whether a property is a person’s ‘main residence’ for Capital Gains Tax (CGT) purposes, it is the quality, not the quantity, of occupation that matters. A tribunal made that point in upholding a householder’s appeal against back-tax and penalty demands totalling more than £46,000.
The man had bought a house for £420,000 through his company. He lived in it for about two and a half months before the financial crash intervened and he had to move out and rent the property to a friend. After his tenant died about two years later, he moved back into the property for a further six months.
However, he felt unable to remain there due to his mental health difficulties and the house was eventually sold for £550,000, realising a profit of £121,000. He did not declare that gain on his tax return and, following an investigation, HM Revenue and Customs served him with a demand for £27,312 in CGT. He also received a late payment penalty of £19,118.
In allowing his appeal against those bills, the First-tier Tribunal acknowledged that he had been in occupation of the house for less than half the period during which he owned it. However, it was satisfied that it had been his intention from the outset that the property would be a home for himself and his family. That hope had in the event been thwarted by factors outside his control. In the circumstances, the house had been his main residence and no CGT was payable.