Elaine Shiels

Written by: Elaine Shiels

Elaine Shiels


Deficiencies in private residence relief regime restrict court findings

An appeal against HMRC’s application of an extra-statutory concession has been struck out by the First-tier Tribunal (FTT), which ruled that it does not have jurisdiction to settle the matter. The case was supposed to determine whether the taxpayer had a ‘good reason’ for a delay in moving into a property outside their control, such that private residence relief (PRR) could be applied throughout.

The taxpayers, Mr and Mrs White, purchased four separate properties between June 2001 and March 2002. The properties were converted into one, which they began to occupy as their main home sometime between September and November 2003.

Both the taxpayers and HMRC agreed that the period between June 2001 and September 2003 was outside the scope of the PRR legislation, which does not currently address gaps between purchasing a property and moving in. Where there is a delay (up to one year, or two years if there is a good reason outside the taxpayer’s control) in occupying a property, an extra statutory concession allows HMRC to decide whether to grant relief for that period.   

HMRC claimed that this concession did not apply because, in its view, the clock started when the contracts were exchanged on the first property (June 2001). The delay was therefore longer than the maximum permitted two years and PRR only applied from the date the couple moved into their home.

The taxpayers appealed to the FTT, hoping that HMRC’s decision would be overturned as it was in a previous similar case. HMRC, however, asked the tribunal to consider whether it had the jurisdiction to review the application of the extra statutory concession, a point which was not addressed in the previous case. The result was that the appeal was struck out because the FTT found that it did not have the power to consider HMRC’s general application of extra statutory concessions. 

This decision should act as a reminder that extra statutory concessions are given at HMRC’s discretion and advice should be sought before relying on them. Readers should also note that this is the second recent case on PRR that highlights deficiencies in the primary legislation that have necessitated extra statutory concessions and court decisions. However, Finance Bill 2019-20 actually proposes to bring this particular concession within the scope of the PRR legislation, so the FTT should have the power to hear appeals on similar points for disposals made after 6 April 2020. 

With 30-day payment of capital gains tax just around the corner, taxpayers will need to make even quicker decisions on complex areas of law, in order to pay the right amount of tax on time.

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