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Letter in a letterbox | AccountingWEB | PPR relief and evidence: a cautionary tale

PPR relief and evidence: A cautionary tale


Amy Chin looks at a Principle Private Residence relief case that should act as a cautionary tale on what may seem like a pointless admin task.

1st Mar 2024
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I'm a millennial. Like my siblings and many of my peers, I still have a bedroom at my childhood home and whenever I visit, I invariably find a small pile of important-looking envelopes on 'my' chest of drawers.

Rifling through the stack, I can accurately predict that 90-100% of the letters will go straight into my mum's recycling, and yet the mail keeps coming and I've done nothing to stop that in the 20 years since I left home.

With so much of my correspondence and accounts accessed online, I simply haven't bothered to change certain addresses, and I know I'm not the only one.

Letters and statements

This case should act as a cautionary tale to remind us of the importance of what may seem a pointless admin task. In the taxpayer's case, letters and statements posted to the address where he claimed to have been living could have provided the evidence he badly needed in his attempt to claim Principle Private Residence relief.

The taxpayer, Mr Sabbir Patwary, lived with his parents until April 2010 when he bought and moved into 19 Emmott Close, London - "the property". Patwary alleges that he lived in the property with his then girlfriend, who later became his wife, and a tenant, until October 2013. The couple has since divorced and Patwary moved back into his parents' house in October 2013.

The property continued to be occupied by a tenant until it was sold in February 2016.

Patwary claimed PPR relief on the disposal and HMRC issued a closure notice disallowing the claim and calculating the capital gains tax due at £43,199.80.

The appeal

Patwary appealed to the first tier tribunal (FTT). The burden of proof was on Partwary to show that the property had been his only or main residence, according to s222 Taxation of Chargeable Gains Act 1992.

This case is similar but considerably less clear cut than that of Mumtaz Hussain, who tried to claim PPR relief on the disposal of a derelict hospital. Hussain's wife had never even visited the property and its derelict condition made it uninhabitable. Patwary's case appears to be more nuanced, but the same factors were considered, based on the Court of Appeal case of Goodwin v Curtis. They are:

  • whether the property was actually occupied as a residence;
  • the nature, quality, length and circumstances of a taxpayer's occupation of the property;
  • whether the occupation was intended to be permanent or merely temporary; and
  • whether there was a degree of continuity or some expectation of continuity to turn mere occupation into residence.

On whether the property was actually occupied as his residence, Patwary stated that he had made "good connection" with a neighbour. No witness statement was provided from said neighbour.

Patwary also asserted that he regularly hosted friends and family for "gatherings" at the property. Again, no evidence was provided. Considering his claim that he hadn't changed his address with the bank because he did everything online, you'd think he could have come up with a few Facebook photos as proof that these gatherings took place in the property.

In terms of intention, according to Patwary, he had intended to make the property his permanent home but moved out due to his marriage break up. (Incidentally, he could not remember what address had been written on his marriage certificate and this was not provided to the FTT).

Lacking permanence and continuity

HMRC argued that Patwary either did not live at the property during the period of ownership, or if he did, his occupation lacked permanence and continuity, asserting:

"He did not change his address with his bank, HMRC or the electoral roll. He did not provide any documentation that one might expect to be provided in relation to residence in, rather than ownership of, the property, such as council tax bills."

Patwary did produce mortgage statements and various utilities bills addressed to him at the property. However this was, according to the judge, "all of the kind that might be properly addressed to an owner, even if someone else was living in the property at the time".

In his witness statement Patwary asserted "I did not change my address of my bills, simply because I have a close relationship with my family and I visit them regularly, so it is convenient to me to collect my correspondence there. Meanwhile, I was going through a divorce…so I did not want to expose some of my personal information with her. In this case, keeping my mail addressed to my parents’ place seemed logical to me."

He was unable to provide a TV license (he said he didn't have a TV) or bank statements (he claimed that he accessed these online so there was no need to change his address with the bank). He was not registered to vote at the property because he felt his vote held more weight in his parents' constituency.

Remarkably little evidence

Although Judge Allatt accepted that Patwary's story did "not seem improbable", she had been shown "remarkably little evidence from the Appellant to demonstrate a period of residence in the property of over 3 years". There were no witness statements other than Patwary's own uncorroborated testimony, with the judge noting that statements could have been provided from "his lodger, his now ex-wife, or anyone else who knew his presence at the property".

Patwary failed to discharge his burden of proof and his appeal was dismissed.


Replies (7)

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By possep
01st Mar 2024 18:53

Patwary alleges that he lived in the property with his then girlfriend, who later became his wife, and a tenant, until October 2013.

So he lived with his wife and a lodger? Would then perhaps have claimed rent a room relief, or never declared the rental at all and made out it was his PPR.

I guess facts speak for themselves rather than a cautionary tale.

Thanks (0)
By FactChecker
01st Mar 2024 19:56

Can't see the connection between the case and the injunction that it provides a cautionary tale in terms of reminding us of the importance of ensuring letters and statements are posted to the address where one claims to have been living.

As with ANY case where the burden of proof lies with the appellant, failure by the appellant to provide ANY evidence for their various claims gives the concept of 'a high-risk strategy' a bad name!
Reading between the lines, of all the options mentioned, the provision of letters/bills addressed to the property in question would seem to have been right at the bottom rung of what the judge might have considered (but without great enthusiasm).

Basically, if the facts put forward by HMRC are not denied then you have to be able to provide hard evidence of your alternative 'world view' ... not just make uncorroborated claims that are no better than hearsay (if that).

Thanks (4)
By gillybean04
02nd Mar 2024 07:08

"Although Judge Allatt accepted that Patwary's story did not seem improbable"

I thought this seemed strange. If Patwary's story didn't seem improbable why would the decision not have been in their favour?

On reading the judgement I see what was said is that although the events Patwary said took place were not improbable (people do move out of parents to live with partners later get married and can fail to update their address) they would "expect to see certain amounts of evidence to back this up". So while the events themselves did not seem improbable, apparently Patwary's story did.

The council tax was in the lodger's name, according to Patwary. Which the judgement remarked on as, by Patwary's own submission, there was a period from 2010 to 2011 where only he & the girlfriend occupied the property.

Thanks (2)
By ajspipers
04th Mar 2024 10:38

Don't bring principles into this matter! It's Principal, not Principle PRR :-)

Thanks (2)
Replying to ajspipers:
By FactChecker
04th Mar 2024 15:50

Thanks ... I felt it was beneath my principals to point out the egregious typo!

Thanks (2)
Ivor Windybottom
By Ivor Windybottom
04th Mar 2024 11:34

I wonder why more people don't use digital records (e.g. mobile phone tracking data) to show a history of their location - perhaps because it wouldn't help their case!

Thanks (0)
By cfield
04th Mar 2024 11:41

The idea that he had both a lodger and his girlfriend living there with him seems very odd to me. Why would you want to shack up with your lover and have someone else listening through the wall? You can see why the Judge was suspicious.

No mention of an Amazon account or other online suppliers. You'd think he would have had at least some goods delivered there in 3.5 years, especially for a new home when he'd have needed all sorts of stuff. What about his DVLA records? By law, you're supposed to update your driving license and the logbook for your car immediately when you change address. What did he do with the council notices asking him to advise them who was living there? In those days, it was mandatory to return those forms even if there were no changes. Did he just throw them away or send them back signed to say only the tenant was there?

Perhaps he just didn't want anyone to know he was living there, if he lived there at all.

Thanks (0)