In Aqeela Hashmi v HMRC  TC7715, the First Tier Tribunal (FTT) dismissed claims for Private Residence Relief for three properties sold in three consecutive years. The occupation of the properties did not have sufficient permanence or continuity for relief to apply.
A gain made on the disposal of an individual’s only or main private residence is exempt from Capital Gains Tax (CGT) under Private Residence Relief (PRR).
In order to claim PRR certain conditions must be met including:
- The property must have at some stage been the individual's only or main private residence.
Mrs Hasmi bought and sold three properties, one in each of the tax years 2013/14, 2014/15 and 2015/16.
- She claimed to have lived in two of the properties for about six months and in one for nine months. Each property was put back on the market for sale within three months of acquisition.
- The evidence produced to support the properties being her main residence included:
- Property sold 2013/14: council tax payments and delivery notes.
- Property sold 2014/15: three utility bills addressed to ‘Owner/occupier’ and furniture purchase invoices.
- Property sold 2015/16: a letter from British gas, postal voting application and photographs of external works to the property.
- No bank statements or insurance documentation addressed to any of the three properties were produced.
- The reasons given for moving so often were location, a need for more space and problems with neighbours.
- During this time she owned another property which HMRC said was actually her private residence. She was registered to vote and for child benefit there and applied for finance and opened a bank account under the address. She lived there between living at the properties which were the subject of the appeals.
- During HMRC enquiries, she claimed the properties were her private residences and relief applied. HMRC disagreed, assessing her to Capital Gains Tax on each disposal. She appealed.
The FTT dismissed her appeal, finding that PRR did not apply. The judge said:
- It was clear she was trading in property. During the periods in question, she had jointly bought and sold two other properties aside from those which were the subject of the appeals.
- He was not convinced that Mrs Hashmi lived in any of the properties with “some degree of permanence, some degree of continuity or some expectation of continuity”. The evidence provided showed only ownership, not occupation.
In addition, claims to reduce the gain on one of the properties by amounts claimed to have been spent on improvements were disallowed as no evidence could be produced of the expenditure.
Given the comments about property trading, Mrs Hashmi should perhaps count herself lucky that HMRC assessed her to CGT on the disposals and did not treat the gains as trading profits, which would have been taxable at higher Income Tax rates for at least two of the disposals in question.
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