Home is where the heart is and the question of whether a property is your principal private residence for Capital Gains Tax (CGT) purposes depends, at least in part, on your intentions. An instructive case on point concerned a couple who made a house their home for only a few weeks before moving out again.

For a year after buying the house, the couple lived in rented accommodation whilst substantial renovation works were carried out. Whilst working in the property’s front garden, the man was approached by a stranger who offered to buy it. The couple turned him down more than once but, after he increased his offer, they eventually agreed to sell him the house at a handsome profit. The couple and their children lived in the property for only six to eight weeks.

The couple did not declare the gain generated by the sale on their tax returns. HM Revenue and Customs took the view that CGT was payable and raised demands against the couple totalling almost £24,000. They were also issued with penalties of more than £4,000 on the basis that the omission of the gain from their tax returns was carelessly inaccurate.

In upholding the couple’s appeal against those bills, the First-tier Tribunal found that that they were entitled to 100 per cent relief from CGT on the basis that the house was, albeit briefly, their principal private residence. They had intended that the property would be their family home, where they would live indefinitely, and they had only accepted the purchaser’s offer after moving in. The CGT assessments were reduced to nil and the penalties were cancelled.


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