Client has made a PPR claim on disposal of rental property.
We only have one item of (moderate) evidence of occupation due to the long timescales/poor client records.
Under the new rules for inspections is the onus on us to prove the claim is valid? Or the inspectors to prove it is not?
The inspector has suggested they will probably disallow if we dont come up with anything else, and we could then appeal which sounds like a lot of work for all involved.
I should point out if they disallow we would certainly pass this over to a specialist, but would like to know how far to push this with them. They dont to my knowledge have any evidence that another property was the PPR in this period, and as a fall back I will look at making an election under ESCD21 under the extended time limit provisions.
Thanks in advance for any help offered.
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Appeal seems likely
If the inspector has already said that you need to come up with more evidence then it seems unlikely you'll change their mind at this stage. Sometimers you end up having to appeal decisions of inspectors, even when they are wrong in their assertions.
A couple of things you say in your query raise concerns though. You say you are not aware of HMRC having any evidence of another PPR. Why this phrasing and not, "the client did not have another PPR"? You describe the property as a rental property. If it is a rental property, how are you classifying it as a PPR?
Basically, on what basis did you make the claim in the first place? You refer to long timescales, so does this mean the client has not lived in the property for quite some time (if at all). If you've acted for this client for some time do you have evidence on your own files to back up the address (your own letters are probably not enough but any official letters, copy bank statements, or similar documents showing the address might server the purpose) If you are serious about pursuing this, you need to be very sure of your grounds and, without any evidence, I'm not qute sure how you can be.
more info
Thanks for your help.
The basis for the claim is that my client has stated that they bought the property with an intention of living there and did indeed occupy for a period. It was then let for most of the ownership, although there are returns by the owner as during tenancy voids due to the prime location, essentially as a second home. The only evidence we have however, apart from the assertions of my client, is a council tax statement. I dont have any reason to doubt my clients statements.
We did not act for earlier years as the returns were completed on a DIY basis.
In terms of my phrasing, I was thinking from the point of view that if there was no evidence another property was the PPR during the period, then would our evidence suffice? That is to say if HMRC have no evidence to contradict my client's assertions and weak evidence, is the weak evidence enough? When I say "evidence" its not that anything is to my knowledge being hidden, its a question of trying to look at it objectively from an inspectors point of view.
The crux of the question is perhaps better expressed from a math point of view, if we have 10 items of evidence, 9 in my clients favour and 1 in HMRC's I would expect them to agree on balance with my client. If we have one item in my clients favour and nothing to disprove, is this enough on balance to not disagree with my client, or do we need to actively prove it?
I think I know the answer (we need more evidence or it will be struck out) but its worth to my mind considering the point.
"Essentially as a second home"
Maybe unfortunate phrasing on your part but you have described your client using the property during tenancy voids as a "second home". The facts of the matter appear to be that your client lived somewhere else for a significant portion of time, apparently in a very settled manner. Presumably he was filling in tax returns to account for the rental income (if not, this might be another issue) so HMRC will have address details for him for the period of ownership. If this is the case then HMRC will have evidence of another PPR (the address registered for tax returns). At the same time the property was used for letting (i.e. unavailable to your client) and this wasn't an enforced absence from employment (you imply the other home is nearby, though not in such a prime location)
You essentially have two problems. Firstly, there were presumably no elections made for which property was PPR. Elections have to be made within two years of a change in the number of available properties. Your information indicates that the period of ownership far exceeds that. In the absence of an election, relief is said to be "based on the facts" and here you hit the second problem that he undoubtedly lived somewhere else. At best I'd say you are looking at the claim being heavily restricted but, in the absence of an election, you will need to show the "facts" prove he lived there at some time to get relief at all. I very much doubt that a tribunal will accept no proof of an alternative PPR (and, as I said above, HMRC may have some proof anyway) as proof that this property was his PPR. I would expect you'd at least need to demonstrate that any alternative accommodation was not his PPR (which would appear difficult on the facts presented) to have any hope of success.
Was the last return during a void period
within the last two years?
Potentially the 2 year clock restarts when there is a gap and the client moves in as each time that happens he has two residences available and a new period for election begins.
Just a thought. You still have the problem of convincing HMRC that there are two residences available, and used but the election problem could be sorted.
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ACD - yes the election route is a possibility under either the route you suggest or ESCD21. Its actually a very messy scenario with lots of moving about and properties being purchased, sold and rented by the owner and rented out which gives considerable scope for election when i get my head around it all and see what evidence we can muster for other periods. You still have to support and election with evidence of course.
Stepurhan, thanks again for your comments and thoughts. There is no obvious PPR which is part of the problem, its not simply an attempt at a quick claim for a few months whilst really living somewhere else, as you have perhaps (quite reasonably) reasonably assumed. Inspector says he doesn’t have any firm evidence either way (the main address he has is simply a correspondence address) and is looking for us to prove the claim rather than him disprove - which quite frankly I cant argue with on a pragmatic basis - at the same time whats logical often isn’t what the law says his powers are, hence my hypothetical does 1 beat nil?
Well indeed
but a proper in time claim has got to trump trying to get HMRC to let you use a concession when they don't think there is evidence of use anyway.
The trouble is you have scant evidence against nothing from HMRC's counter, so you will probably end up at an appeal, when you have got to hope that what you do have is sufficient to persuade the tribunal
Try asking a neighbour
If there are any neighbours who live nearby and can verify that your client lived at the property (or you can trace some who lived there at the time), get them to write a letter confirming same. I had a similar problem with little or no evidence of a PPR but the neighbour's letter won the day!