In Cornelia Simpson v HMRC [2019] TC7576,  the First Tier Tribunal (FTT) found that the failure to report a capital gain on the disposal of a London flat resulted in a £14k penalty. A claim for Private Residence relief was dismissed by the FTT. The taxpayer failed to provide any evidence to show that she had ever occupied the property. 

  • Ms Simpson purchased a flat in Earl's Court Square in London for £630,000 on 5 June 2013.
  • In estate agent speak, she 'flipped' the property and sold it on 29 November 2013 for £900,000.
  • HMRC discovered the transaction during enquiries into her later tax affairs and made a Discovery Assessment raising a capital gains tax (CGT) assessment for tax of £52,656.76 and together with a penalty assessment for Failure to notify chargeability to CGT of £14,217.32.

HMRC denied Private Residence relief (PRR) on the basis that:

1. She never occupied the flat as residence at all, or

2. If she occupied it as a residence, it was not her main residence, or

3. If it was found to be her only or main residence, PRR relief was not applicable because she had acquired it wholly or partly for the purpose of realising a gain from the disposal of it.

The taxpayer appealed to the First Tier Tribunal (FTT).

The FTT found that:

  • HMRC's discovery was validly made.
  • Ms Simpson had refurbished the flat and re-sold it in a matter of months.
  • Her witness evidence was no reliable.
  • She was unable to provide any evidence to confirm that she had actually occupied the property at all.
  • She had failed to notify her chargeability to CGT and was therefore liable to a penalty.
  • The error was non-deliberate.

It dismissed her appeal.

Although not required to consider the third point of HMRC's case, the FTT also found that although she had acquired another flat a year later, and she had later described herself as a property developer, there was insufficient evidence that she had formed an intention to be a property developer or manager when she purchased this flat.

Did you know?

Although the relief is often referred to as online 'Principal Private Residence relief' the actual relief is called 'Private Residence relief' according to the Taxation of Capital Gains Act 1992. 

Useful guides

Private Residence relief: at a glance
(freeview summary)

Private Residence relief: subscriber guide
What is Private Residence relief (PRR)? What are the qualifying conditions? Can you calim relief on two homes? How do you claim PRR? Can you claim PRR if you develop your garden?

Statutory Review
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review?

Tax Appeals
What type of a decisions are appealable? What are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Penalties: Failure to Notify Chargeability
What penalties apply if you fail to tell HMRC that you have taxable income or gains?

External links

Cornelia Simpson v HMRC [2019] TC7576