In Trevor Hartland v HMRC [2014] TC04187 the First Tier Tribunal (FTT) considered a sequence of private property disposals in order to determine which, if any, were trading activities and which qualified for CGT private residence relief.

The law

A gain made on the disposal of an individual’s only or main residence qualifies for CGT private residence relief (PRR) by virtue of section 223(1) TCGA 1992. Section 224(3) denies PRR where a dwelling house is acquired wholly or partly for the purposes of realising a gain on its disposal; the purpose of the latter is to prevent property developers from claiming PRR. See Private Residence Relief.

The facts

Mr Hartland ran a plant hire business and between May 2003 and February 2008 purchased land and properties for development and improvement and onward sale as part of a property development trade. He also purchased four houses over the years which he claimed were main private residences:

  • The first property was acquired in January 1996 and sold in January 2000, after obtaining planning permission and adding an extension in 1999. He submitted that he bought the property to live in rather than for sale.
  • A second property was bought in January 2000, for which the taxpayer registered for council tax. Part of this property was removed and replaced with a new large extension and it was subsequently sold in July 2002, as the taxpayer claimed he was concerned over the level of financing.
  • A third property was purchased in September 2002 in very poor condition. This property was demolished and rebuilt while the taxpayer lived in a caravan on site. He moved in briefly and used the property as an address for correspondence. The property was sold in February 2004 when the works were completed.
  • A fourth property was bought, demolished and rebuilt, although the taxpayer never moved in to it. HMRC’s approach HMRC denied CGT main residence relief.

Disclosures from his bank suggested that business profits were overstated on mortgage applications compared to submitted tax returns, this suggested that income had been included from the sale of these properties. The loans taken to finance the properties enabled the balances to be repaid within a year or so without redemption penalties. HMRC considered that there very little difference between the properties which were declared as trading transactions and those which were not. All properties had extensive work undertaken followed by a sale on completion.


The Tribunal accepted HMRC’s submission that what matters is not the intention at acquisition but what the person did, which cannot be considered in isolation if it is part of a course of conduct. In arriving at a decision the Tribunal decided not to consider each of the badges of trade, but instead to stand back from the facts and ask ‘whether the picture they paint, viewed from a reasonable distance, is of a man making improvements to his home before selling it and moving on to repeat the exercise…or of a person setting out to earn a living’

It decided that three of the properties were bought with a view to making them a home. However, the property which had remained unoccupied, demolished and rebuilt was ‘impossible to accept’ that it might have been the taxpayers private residence, reaching the ‘inescapable conclusion’ that was bought to develop and sell at a profit.


The case highlights the potential problems that individuals may encounter in claiming PRR if they are also involved in other similar activities on a commercial basis. It is important to establish both quality of occupation and also consider overall intent, see our Quality of occupation checklist in Private Residence relief.