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Reliefs to stop HMRC claiming Capital Gains Tax when you sell a property that may have been your home



Taking account of the cash flow advantage now available to HMRC in relation to the Capital Gains Tax (CGT) being collected within 30 days of a property sale, it may be unsurprising that the reliefs available to those disposing of residential property and CGT in general is a hot topic for HMRC at the moment.

Recently there have been several challenges made on individuals claiming Principal Private Residence Relief (PPRR). In the last few days, a Mr & Mrs Core have managed to overturn HMRC’s decision and claim full relief on the sale of a house they bought and renovated, despite living there for less than two months during which time they rented a house elsewhere.

Facts of the case

Mr Core, a builder by trade, was married with two children. He operated his business through his own company.

On 22 March 2013 he purchased a property in Green Lane. At the time, he was living with his family in rented accommodation in the same town as the Green Lane property which he had recently purchased. They did not move into Green Lane upon purchasing it, as they wished to extensively renovate the property. Mr Core carried out this building work himself.

Due to the amount of work involved in renovating the property, Mr & Mrs Core signed an extension to their lease of Victoria Road, to 30 June 2014, with the landlord on 18 December 2013. On 23 June 2014 they signed a further such extension, to 31 December 2014.

They family moved into Green Lane in March 2014 as the building work was sufficiently complete to allow habitation. The lease on the rental property carried on as Mr Core wanted to use the space for his next building project. These facts support that the family had moved to Green Lane expecting to live there for an indefinite period.

During the course of the refurbishment work on Green Lane, Mr Core had a dispute with the next door neighbours. Initially the dispute was over boundary/party wall works. Then, police and council were called in reference to vehicles illegally parked. Following a further complaint, an argument became physical. On 16 June 2014, Mr & Mrs Core sold Green Lane to an individual who was living locally.

Mr & Mrs Core did not include the gain on the sale of Green Lane in their 2014-15 tax returns as they believed the house was their main residence and PPRR would be available. HMRC disagreed and issued closure notices for their 2014/15 tax returns, showing CGT of £11,990.03 each. In addition HMRC charged a careless inaccuracy penalty of £2158.20 each in respect of the same gain.


The First Tier Tax Tribunal held that as they had moved into Green Lane with their children – when they had a continuing lease at Victoria Road and so could have stayed on there until the end of June – is strongly indicative that they expected to live at Green Lane indefinitely.

By applying sections 222 and 223 TCGA, the whole of the again on sale of Green Lane was within the PPR exemption and the assessments in respect of the gain on sale where reduced to nil and all subsequent penalties cancelled.

What is PPRR?

PPRR provides an exemption from paying capital gains tax (CGT) when selling your principal residence (the home that you live in most of the time). The theory being that if you live in your home throughout your ownership of the property you don’t pay tax on the increase in value (gain).

Since April 2020, the disposal of residential property must be reported to HMRC within 30 days of the settlement date unless it can be established that the gain is exempt. PPRR is a significant exemption in such calculations. Ultimately the relief should be considered in every case where the property was your home at any point during the ownership period.

In April 2020 elements of this relief were further restricted by legislative change relative to the final ownership period, which provides relief for those having difficulty selling the property (now limited to 9 months), and the availability of lettings relief, neither of which really were in play in this case. The incorporation of Extra Statutory Concession (ESC) 49 into legislation, however, definitely was relevant.

This extends the relief to include the renovation period where an individual is unable to occupy their new home, either because they are completing the sale of their previous home or because they are constructing/renovating their new home. A period of 12 months or in certain circumstances 24 months will be covered by the relief beginning with the date of acquisition.

This point certainly allowed the relief to extend back from the period of occupation to cover the period from the purchase date. That along with the family actually taking up residence indicates that it was their intention to reside there but for the unforeseen circumstances they were met with, and it had not been their intention to merely renovate and sell on the property.

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If you are selling residential property you should take advice to ensure that you are aware of the intricacies of these reliefs to ensure that you have considered all possibilities and reported where required. HMRC are looking at the land register to compare with the reported disposals so it is expected that they will pick up on undisclosed cases.

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