HMRC deny PPR relief on second home even though pr

HMRC deny PPR relief on second home even though proof of occupation

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Hi

Inspector does not allow claim for PPR on house even though accepted (evidence) that the home was occupied for 2 months while works carried out in the couple’s normal house. Stating no permanence intention as a reason. The family returned to the main home and the other house was rented out for 5 years before sold. At the time private residence election had been filed to nominate as PPR for 2 weeks but HMRC deny existence (copy sent now). I think this is wrong. Is there any relevant legislation or court cases on this? many thanks. 

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paddle steamer
By DJKL
17th Nov 2017 11:19

Are they not going to catch it under 224 anyway, what was the purpose re its purchase?

"(3)Section 223 shall not apply in relation to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it"

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Replying to DJKL:
By Duggimon
17th Nov 2017 11:39

It doesn't follow that the purchase of a second home is automatically wholly or partly for the purpose of realising a capital gain, does it? It could have been bought for other reasons entirely.

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Replying to Duggimon:
paddle steamer
By DJKL
17th Nov 2017 11:49

We do not know what it was used for before the temp visit, but we do know what it was used for afterwards, it was let until sold.

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Portia profile image
By Portia Nina Levin
17th Nov 2017 11:47

There are relevant court cases. They lost.

Summary: staying somewhere for a few weeks as a temporary stop-gap does not a residence make.

My money's on HMRC with this one.

Thanks (3)
By forrest gump
17th Nov 2017 11:57

from a quick look i can see that court wen with HMRC in cases where the owners moved in just before they sold the house - this is not the case here. btw the house had been owned by the owners' ltd company before it was transferred to them and they took the short occupation before they rented it.

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Replying to forrest gump:
RLI
By lionofludesch
17th Nov 2017 12:11

Some guy won with an occupancy of a few months a couple of years ago because his circumstances changed shortly after he bought the property. But that doesn't seem to be the case here.

As far as I recall, though, all the other cases have been, shall we say, unduly optimistic.

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Replying to forrest gump:
By cfield
20th Nov 2017 11:27

forrest gump wrote:

btw the house had been owned by the owners' ltd company before it was transferred to them and they took the short occupation before they rented it.


Did the company report a chargeable gain on its corporation tax return based on market value at the date the house was transferred?
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paddle steamer
By DJKL
17th Nov 2017 12:14

A quick search on Nichola's website gives you this, I suspect there are plenty more.

http://www.rossmartin.co.uk/sme-tax-news/2028-quality-of-occupation-insu...

"The FTT agreed with HMRC, deciding that Mr K’s occupation of the property lacked the necessary degree of permanence or continuity, or the expectation of continuity of residence for the property to qualify as his private residence. His appeal was dismissed."

In Mitesh Kothari v HMRC [2016] UKFTT TC04915 the First Tier Tribunal (FTT) decided that the occupation of a property was not sufficient to qualify it as a residence.

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Replying to fawltybasil2575:
Portia profile image
By Portia Nina Levin
17th Nov 2017 13:05

I understand that Eastenders are looking for scriptwriters Basil.

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Replying to Portia Nina Levin:
By mrme89
20th Nov 2017 14:51

I'm occasionally forced to watch an hour.

A 6 hour episode would be unbearable.

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Replying to mrme89:
Portia profile image
By Portia Nina Levin
20th Nov 2017 14:57

But that would be 6 hours with a Basil plot!

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Replying to Portia Nina Levin:
By mrme89
20th Nov 2017 14:58

A Basil-sode? A 6 hour marathon of non-stop drama.

I can't wait!

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Replying to mrme89:
Portia profile image
By Portia Nina Levin
20th Nov 2017 15:03

Every twist and turn articulated, enunciated, and accentuated for your veritable viewing pleasure. You'll love the way that he rolls his Rs.

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By ireallyshouldknowthisbut
17th Nov 2017 14:21

@ FG, I think you are coming at this from the nomination angle, rather than deemed residence?

You can use a nomination of "main" where you have two or more properties that are a residence, but you cant make a house that isn't your home your main residence using a nomination alone, although the test is only "residence" and not "main residence" so its a much weaker test and there might be some mileage in arguing it was "a" residence, if not likely to be a winner.

HRMC seem to be quite happy to allow the "city crash pad" with a flash nomination for a few months when the owner has much larger country house where the family live.

I am sure you have seen it, but the manuals deal with this here:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64485

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avatar
By Choctop
20th Nov 2017 11:47

From the information given, my money is also firmly on HMRC. The existence or not of the election is a red herring. The question is whether this property was a residence at all (let alone a principal residence) and the facts would seem to suggest it was no more than a place to sleep while main house was being refurbished.

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avatar
By cliveth
20th Nov 2017 14:43

Occupation itself isn't relevant. There needs to the intention that it is to be occupied as a main residence and it is the quality of the occupation that is crucial here. There was only temporary occupation and the courts have consistently ruled that this isn't sufficient to claim PPR. In any event I agree that Section 224 could be invoked by HMRC so the client loses one way or another.

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Northumberland flag
By MJShone
21st Nov 2017 12:26

On the basis that it was a de facto main residence - you won't get it - for reasons enunciated by others.
On the basis that it was nominated - you will get it - if HMRC accepts that the nomination is valid.

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