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CGT tribunal: appeal won on ‘compelling family reasons’

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2nd Nov 2011
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A man who bought and sold two properties after a stressful split with his wife has won an appeal to be given tax relief on the properties, reports Nick Huber.

The case of Mr AJ Clarke v HMRC (TC 01461), centred on two properties which Mr Clarke bought and sold after leaving his wife – who, the tribunal heard, was­ “having an affair and was under the care of a psychologist”.

Mr Clarke, who is now divorced from Mrs Clarke, left his matrimonial home, Oaks Farm, and in July 2002, bought and moved in to a property, 60 Nayland Road, funded by a business loan. 

Mr Clarke obtained planning permission to build a detached house in the garden of his new home. He sold 60 Nayland Road and moved into his mother’s home while he built the new property at 58a Nayland Road. Mr Clarke said that he started living at 58a Nayland Road in July 2003.

In July 2005 his wife attempted to commit suicide, the tribunal heard, and Mr Clarke felt that “he had no option but to move back to the marital home to protect his children”. He sold the 58a property in November 2005.

HMRC argued that neither of the two properties was Mr Clarke’s only or main residence when he owned them and he had no intention to live permanently in either of the properties. In order to avoid paying capital gains tax (CGT) and qualify for private residence relief, the home should be the seller’s main residence, under CGT rules.

In his ruling, the tribunal judge, SMG Radford, found that there were compelling family reasons for Mr Clarke to move away from his matrimonial home and for the need for fast financing offered by a bank loan, and his later return.

The judge said that the appellant “ultimately... had to move back to Oaks Farm after the disappearance and suicide attempt by his ex-wife.”

HMRC has updated its guidance on corporate capital gains to include changes in the Finance Act 2011, particularly a measure (CG53175) relating to substantial shareholdings exemption, aimed at countering tax avoidance. 

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