When seeking to claim the ‘principal private residence’ (PPR) exemption –
which exempts from Capital Gains Tax (CGT) gains made on the sale of the PPR of the taxpayer – the criteria for exemption are strictly interpreted by HM Revenue and Customs (HMRC).
A builder and his wife, who had bought a property together in 1999 and sold it in 2004, recently had their claim for PPR rejected by the court on the facts of the case.
The property needed renovation and the builder did the work himself. He lived (alone) in the property from December 1999 until February 2000. He kept only a bed and a cooker there and neither informed the local council that he was living there nor paid rates.
The couple claimed that they intended to move into the house when it was renovated, but this wish was dashed because the builder’s wife (then his partner) found the neighbours to be ‘unruly’ so she refused to move into the property. The builder hoped she would change her mind and continued to renovate it, but it was let out when the renovations were completed.
In 2001, the property was transferred into the builder’s name alone and he then carried sole liability for the mortgage. The couple married in 2004 and sold the property that year.
In the view of the court, the husband’s occupation of the property ‘did not have the quality that turned mere occupation of it into its being his residence’ and the judge concluded that the couple’s intention was to buy the property and renovate it for letting.
The claim for PPR was therefore denied.
Says <<CONTACT DETAILS>>, “In this case, the purchase for commercial purposes of other properties, as well as the husband’s business occupation and his failure to pay rates when he lived in the property, cannot have helped the couple’s case, but it is important to make sure that the rules for claiming relief are met. Had there been a short period of genuine occupation of the premises as the PPR, the outcome could well have been different.”
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Jason Terrence Moore v Revenue & Customs  UKFTT 445 (TC), 21 September 2010.