Capital Gains Tax: Private Residence Relief – Burden of Proof

26th January 2024

The recent First Tier Tribunal case of Patwary (https://caselaw.nationalarchives.gov.uk/ukftt/tc/2024/53) considered the burden of proof that a property was a only/main residence for tax relief purposes.

 

The availability of Private Residence Relief (PRR) available on your only/main residence is one of the most valuable Capital Gains Tax (CGT) tax relief’s available.

 

PRR will exempt a gain, or a proportion of a gain, on the sale of a dwelling house which has been an individuals residence during the period of ownership. For most people the home is their biggest asset and, with rising house prices, most likely to result in a gain. It is important therefore that PRR is claimed and due as appropriate.

 

 

How to qualify for PRR

For a dwelling house to qualify for PRR it has to actually be used as a residence. Furthermore it is a well established principle that ‘in order to qualify for the relief, a taxpayer must provide evidence that his residence at a property showed some degree of permanence, some degree of continuity or some expectation of continuity.’

 

 

First Tier Tribunal Case

Going back to the above case, Mr Patwary acquired a property in April 2010 and lived there until October 2013; the property was tenanted until sale in February 2016. HMRC contended that PRR was not due on the property, failing the permanence aspect mentioned above but also there was no proof. HMRC issued an assessment denying relief and Mr Patwary appealed to the First Tier Tribunal. HMRC contended that Mr Patwary did not change his address with the bank, HMRC, electoral roll and produced no documentation that related to occupation.

 

The onus of proof that an assessment is incorrect falls on the taxpayer. In this case the Tribunal found the evidence to be insufficient, the evidence produced was the kind of ownership but not occupation. With the lack of evidence Mr Patwary’s appeal failed.

 

 

A reminder for all

A timely reminder to ensure that you retain as much documentary evidence as possible of the occupation of a property for PRR. Especially one you may not have occupied for any length of time. Examples of proof are changing your address with banks and other establishments, council tax bills, notify HMRC, water rates, driving licence, and the such like. You can even provide photos and statements from neighbours.

 

 

Get In Touch

For more information or advice on Private Residence Relief and Capital Gains Tax, contact your local Whitings LLP office today.

 

Disclaimer - All information in this post was correct at time of writing.
Other Blogs
Shamus Chaplin
20th February 2024 Update on Double-Cab Pick-Ups: HMRC are reversing

Update on Double-Cab Pick-Ups   On the 12th February 2024, HMRC announced that their interpretation of the legislation had changed regarding the favourable tax treatment of pick-up trucks from 1st July 2024. However, after consulting farmers, construction workers and other industry professionals they have now reversed their decision!     Current Position HMRC interprets the…

Ian Piper
19th February 2024 SME Ely Business Awards 2024: 1 Week Left To Enter!

There is just one week remaining to enter the SME Ely Business Awards for 2024!   Celebrate your business’ achievements and be in with a chance of winning by entering today. Entries close on Thursday 26th February 2024 at 3pm. Find Out More Click here to find out more about the SME Ely Business Awards…

Maddie Milner
16th February 2024 Companies House changes from 4th March 2024

,Find out more about the upcoming Companies House changes from 4th March 2024 here.     Registered email addresses One of the main changes from the 4th March 2024 are Companies House require all companies to provide a registered email address which will be collected within your companies next Confirmation Statement.   New companies will…

Shamus Chaplin
15th February 2024 Double-cab pick-ups: End of the road?

*An update on this has since been posted. Click here to read the updated information.*     The tax treatment of double-cab pick-up trucks is set to change with effect from 1st July 2024, and will see the vehicles lose their status as ‘commercial vehicles’ when it comes to company car taxation. This could see…

Nick Edgley
12th February 2024 End Of Year Tax Planning: Pre 5 April

Have you thought about your end of year tax planning?   As another tax year end comes around we turn our thoughts to any tax planning that can be undertaken before the 5 April.   You can find a link to our general tax planning guide here Tax Year End Planning Feb 2024, as a reminder…

Ian Piper
9th February 2024 Spring Budget: The SME wish-list?

With the 6th March Budget just around the corner, many SME business owners are beginning to wonder what’s in Mr Hunt’s red ministerial box, which got us thinking, ‘what might the SME wish-list look like in the ideal world?’   There are 2 reasons to be a little more optimistic than usual this time around:…