Insufficient quality of occupation for PRR

In Mumtaz Hussain v HMRC [2022] TC8366, the First Tier Tribunal (FTT) denied a claim for Private Residence Relief (PRR) on the sale of a former hospital. The taxpayer had not occupied the property as his main residence.

• Mr Hussain purchased the former Mansfield General Hospital in 1994.
• The total interior space of the Hospital amounted to 150,000 square feet and the site occupied 2.8 acres.
• Mr Hussain’s stated intention was to renovate the property himself for his family over a period of time.
• Mr Hussain sold the property at a gain in July 2013.
• He claimed Private Residence Relief on the property contending that he had occupied the property as his main residence for a year.
• HMRC raised an enquiry into his tax return and issued a Closure notice denying the relief.
• Mr Hussain Appealed to the FTT.

The FTT dismissed the appeal finding that:

• Despite ownership of a number of other propertiesm Mr Hussain failed to make a PRR election to state which property was his main residence: his main residence needed to be decided in considering the facts.
• His occupation of the hospital was not of sufficient quality to make it a residence as:
  • The hospital was not habitable as a dwelling.
  • In 2011, 17 years after purchase and after the period of occupation, no work had been done to renovate the hospital. Medical equipment remained in place and it remained derelict.
  • The furniture used by Mr Hussain in the hospital had come from his other property and had remained there since. This suggested he had not made a substantial move to the hospital as the furniture had not gone back with him when he returned to his other property.
  • That council tax was paid for a period did not show the hospital was residential property.
  • He had not updated important correspondence addresses such as those held by his bank, insurers or HMRC.
  • Mr Hussain submitted the hospital was not suitable for his wife to live in and she never visited the property. As a married couple can have only a single main residence, the hospital could not be regarded as her main residence.

Useful guides on this topic

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

Closure Notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights?

How to appeal an HMRC decision?
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

Mumtaz Hussain v HMRC [2022] TC8366