In Mr & Mrs Carrasco v HMRC [2016] TC05460 the First Tier Tribunal (FTT) set aside a penalty for careless inaccuracy: the taxpayer relied on incorrect professional advice in making a Private Residence Relief claim.

Schedule 24 FA 2007 imposes a penalty for error in a taxpayer document. No penalty is charged if the taxpayer can show that he took reasonable care

  • Mr Carrasco inherited a property and it had been rented out.
  • He and his wife exchanged contracts to sell it on 25 May 2010.
  • They moved into the property on 29 June 2010 and lived there until 22 July.The sale completed on 23 July 2010.
  • Their accountant had advised that if they lived in the property before the sale they could exempt the last three years’ of the gain by claiming Private Residence Relief (PRR).

HMRC disallowed the claim and assessed penalties for careless error on the basis that contracts had been exchanged before moving into the property.

  • S28 TCGA 1992 provides that for CGT the date of disposal for property is that date on which contracts are exchanged and not at completion.

Mr & Mrs C accepted that the PRR claim failed, however they appealed the penalties as they had relied upon professional advice: their accountants were unaware of s28 and its implications aside from which they had not considered whether the period of occupation would be sufficient to make it their permanent place of residence.

The FTT found that:

  • The PRR exemptions are ‘sufficiently technical and obscure as to fall outside the working knowledge of the average man in the street’ so that it was reasonable to rely upon professional advice.
  • The taxpayers had taken reasonable care in placing reliance on their accountants who were in possession of all relevant facts.

The appeal was allowed and penalties quashed.


Appeal: mistake by an adviser

Appeal: taxpayer has taken reasonable care

Appeal: grounds for appeal

CGT Private Residence Relief

Case reference: Mr & Mrs Carrasco v HMRC [2016] UKFTT TC05460