No CGT relief for three homes sold in three years
A taxpayer who made gains of £211,506 from three homes in three years claimed CGT exemption on the basis that she occupied each as her main home for a short period.
Aqeela Hashmi [TC07715] appealed against three CGT assessments issued by HMRC under s29 TMA 1970 relating to the tax years 2013/14 to 2015/16.
Between 2013 and 2015 Hashmi bought and sold at least five properties of which three were the subject of this appeal:
- Crown Leys, Aylesbury - sold in 2013/14 with gain of £32,629
- Mirador Crescent, Slough - sold in 2014/15 with gain of £81,218
- Farm Crescent, Slough - sold in 2015/16 with gain of £97,659
Hashmi argued that she had lived in all three properties as her principal private residence and so was entitled to principal private residence relief (PPR) under s222 TCGA 1992.
Taking each property in turn, HMRC argued that Crown Leys was purchased on 28 March 2013, listed for sale a few weeks later on 10 May 2013, and sold on 18 September 2013 at a gain.
The taxpayer argued that Crown Leys was sold for practical reasons; as Hashmi was pregnant and her husband Akram worked in Slough, a decision was taken to move back to Slough.
A similar tale unfolded with Mirador Crescent: HMRC believed it was bought on 11 November 2013, listed for sale on 14 February 2014 and sold on 6 June 2014 at a gain. Extensive work was carried out to the house during the taxpayer’s ownership.
The decision to sell Mirador Crescent was attributed to an incident where Akram saw two youths trying to break in and enter the property while he stood outside, leading the taxpayers to believe that the property was not ideal for bringing up a young family.
Farm Crescent had an equally short period of ownership. HMRC argued it was bought on 16 September 2014, listed on 3 October 2014, and sold on 10 July 2015 at a gain. Again, extensive work was carried out.
The decision to sell Farm Crescent reportedly arose from the issue that the property had previously been used by criminals as a cannabis farm, and the previous owner (who lived next door) subjected the taxpayer’s family to ongoing harassment.
Only or main residence
The taxpayer relied heavily on HMRC’s guidance, putting particular emphasis on the argument that the homes had been her only or main residences during her respective periods of ownership.
HMRC claimed Hashmi’s principal private residence had been an entirely different property in Shaggy Calf Lane, Slough - throughout the three tax years under appeal.
HMRC pointed to the fact that Hashmi had obtained Volkswagen finance in April 2013 and had opened a Barclays bank account in July 2013, giving her address for both applications as Shaggy Calf Lane, when she claimed to be living at Crown Leys.
HMRC’s child benefit records also confirmed that her children were all resident at Shaggy Calf Lane. Electoral roll data confirmed that Hashmi had been resident at Shaggy Calf Lane for 11 to 15 years and Akram had also been on the electoral roll at Shaggy Calf Lane from 2011 to 2017.
The taxpayer failed to provide sufficient evidence to show that she had actually lived in the properties in question. The documents provided to HMRC across the properties included copies of delivery notes, confirmation of registration for council tax, and utility bills addressed to Owner/Occupier.
The FTT said that it was clear that Hashmi was trading in property, with the short periods between the acquisition and disposal of each property at a gain after undertaking improvements being indicative of trading. This was not an argument HMRC had put forward as if it had been upheld the taxpayer could have been assessed to income tax on the profits from the sales in place of CGT.
The FTT also referred to Goodwin v Curtis  STC 475, where Lord Justice Schlemann said “in order to qualify for the relief a taxpayer must provide some evidence that his residence in the property showed some degree of permanence, some degree of continuity or some expectation of continuity.”
Hashmi failed to produce sufficient evidence to convince the tribunal that she intended to live in any of the three properties with some degree of permanence. The FTT also commented that being registered for council tax only shows ownership, not occupation.
Consequently, the FTT found in favour of HMRC, as none of the properties under appeal qualified for PPR. The appeal was dismissed.
HMRC does not just look at whether a taxpayer has occupied a property for the purposes of PPR. Consideration is also given to the quality of occupation. As noted in this case, there should be some degree of permanence, some degree of continuity or some expectation of continuity, which was clearly lacking in this appeal.