In Mark Campbell v HMRC [2025] TC09585, the First Tier Tribunal (FTT) accepted a taxpayer's claim to Private Residence Relief (PRR) on the disposal of multiple properties under the job-related accommodation rules, whilst living in his parents' home.
Mr Campbell was living in his parents' home and had an employment contract to provide care to his father.
- During this time, he bought and sold four properties.
- HMRC asked Mr Campbell to file a tax return to report the final disposal in 2015-16, as they had records of him selling a property which was not his main residence.
- Mr Campbell filed his 2015-16 tax return with a claim for full Private Residence Relief (PRR)on the basis that he was residing in job-related accommodation and he had intended to occupy the property sold as his only or main residence.
- HMRC opened an enquiry into Mr Campbell's 2015-16 tax return, disputing the claim to PRR and subsequently issuing a Closure notice.
- Discovery assessments were also issued in respect of the other three properties for the 2012-13 and 2014-15 tax years.
- The closure notice and discovery assessments were issued on the basis that Mr Campbell was carrying on a trade and was liable to Income Tax on the profits on the disposals, or to Capital Gains Tax (CGT) on the basis that PRR was not available.
- Penalties for deliberate failure to notify were also issued.
- Mr Campbell Appealed to the First Tier Tribunal (FTT) in December 2018.
The FTT found that:
- The activities were not trading and therefore Mr Campbell was not liable to Income Tax on the profits.
- PRR was not available as:
- None of the properties had been Mr Campbell's only or main residence.
- His parents' home was not Job Related Accommodation (JRA)
- The discovery assessments issued by HMRC were valid, and the closure notices were correct.
- The level of penalties raised was appropriate as there was deliberate behaviour.
Mr Campbell appealed to the Upper Tribunal (UT) on the basis that the FTT had made errors of law in concluding that:
- The PRR exemption from CGT based on his residing in JRA was inapplicable.
- The discovery assessments had been validly made.
- Mr Campbell's failure to notify had been deliberate.
Mr Campbell also argued that the FTT had erred in law by failing to consider whether HMRC's decision about the extent of the penalties was correct, and not mitigating them in full.
The UT found that the FTT had:
- Made no error in concluding that Mr Campbell's activities were not trading.
- Wrongly applied the JRA tests and had taken into account irrelevant factors.
- Not considered Mr Campbell's intentions when considering the applicability of PRR.
- The FTT's findings in relation to the properties, as Mr Campbell's only or main residence could not be safely transposed for the purposes of considering his intentions in the context of PRR.
The errors of law above were material, so the FTT's decision regarding PRR based on the existence of JRA was set aside.
The UT went on to find that the FTT had:
- Made no error of law in relation to the validity of the discovery assessments. The appeal was dismissed.
- Made a material error of law in concluding that the penalties should be upheld based on deliberate behaviour. The FTT's decision was set aside.
- Not considered whether HMRC's approach to the extent of penalties charged was correct and did not give any reasons for upholding them. The FTT's decision was set aside.
The appeal was remitted to a differently constituted FTT to come to a conclusion on the outstanding matters above.
The FTT found that:
- Mr Campbell was entitled to full PRR on three out of four of the properties on the basis that his intention at the point he acquired each property was to occupy it as his only or main residence.
- Mr Campbell was only entitled to PRR of 19 out of the 27 months of ownership on the fourth property, as he only had the intention to occupy it as his only or main residence for one month, and 18 months was allowable under Section 223(2) of TCGA.
- The remainder of the gain was fully covered by his Annual exemption, so no CGT was payable on the fourth property.
The appeal against the closure notice, discovery assessments and penalties was upheld.
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?
Discovery assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?
Penalties: Failure to Notify
What tax penalties apply if you fail to notify HMRC that you are chargeable to tax? Can they be appealed or reduced?
How to appeal an HMRC decision
Disagree with an HMRC decision? How do you 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 link