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The latest on Private Residence Relief: Recent judgment yields tips for qualifying

Author: Mark Thomas
Date: 23rd December 2015
Tags: TaxCapital Gains Tax

Richard Dutton-Forshaw v HMRC TC4644 (RDF v HMRC) involved a dispute over whether or not a property qualified for private residence relief (PRR) on capital gains tax (CGT).

RDF split his time between London, where he worked, and Lymington. He sold his Hampshire home and bought another house in the same town, intending to move into it with his girlfriend, but the relationship then ended. He then moved into one of his London properties, where he lived for two months, before deciding to live in Lymington after all.

He moved out of the London property, sold it and claimed PRR on the profit. HMRC refused, arguing that RDF didn’t occupy the London property with the intention of its being his residence: they said he always intended to move to Lymington, as he was on the electoral register and had his mail directed there.

RDF argued that he did those things when he thought he was going to move to Lymington and only neglected to notify the authorities in London because of complications in his family life. The tribunal believed RDF’s version of events and this was enough to swing the judgment in his favour.

The vital factor in RDF’s case, and in any dispute with HMRC involving PRR, is that a property should count as a residence. How do you establish that?

Tip 1: if the property is to be your home for a short time, get your family members’ names put on the local electoral register as soon as possible. Join the local library, notify your accountant and HMRC of your new address. Basically, take any steps which imply permanence.

Tip 2: the position is more difficult if you have more than one residence. It’s important to keep a record of the time you and your family spend in each. Again, take steps which, in a dispute with HMRC, illustrate that you occupy both properties as homes – keep clothes and personal possessions in each, make local contacts, get a newspaper delivered and so on.

This case proves that a property can qualify for PRR, even when you live in it for a short time.

If you are in any doubt about your position in relation to this issue, please talk to your usual Thomas Croft contact as soon as possible.

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