UK and International Tax news

Court Of Appeal Decision In PPR Relief Case

Monday 2nd December 2019

The Court of Appeal has recently issued its decision in a case involving the availability of principal private residence relief to an off market purchase and sale.

In Higgins v HMRC [2019 EWCA 1860], HMRC had assessed the taxpayer to CGT on the basis the property had not been his only or main residence for all of his period of ownership.  The taxpayer had successfully appealed to the FTT but the UT reversed the FTT decision.

In October 2006 the taxpayer entered into a contact to take a 125 year lease of an apartment which was to be in the former St Pancras Station Hotel once converted. The taxpayer paid a deposit on exchange of contracts and a further deposit in March 2007. The balance of the purchase price was due on completion.

The taxpayer had sold his former residence in July 2007 and had various residential arrangements until 2010.

The development was delayed by the 2008 credit crunch and work on construction of the apartment did not start until November 2009. The taxpayer completed on the purchase of the finished apartment in January 2010 and he had no right to occupy the apartment until it was finished. The taxpayer occupied the apartment from January 2010 and sold it in January 2012.

The central question of the appeal related to the meaning of the words “period of ownership” in s.223 TCGA92.  If that period did not begin until January 2010, then the apartment was the taxpayer’s main residence “throughout the period of ownership” and no CGT can be payable. If, on the other hand, the taxpayer’s “period of ownership” began when contracts for the purchase were exchanged, s.223(2) will be in point and relief from CGT would only apply to part of the gain made.

The FTT concluded that PPR relief relieved the taxpayer from any liability to CGT on his sale of the apartment because, in the FTT’s view, “the period of ownership for the purpose of Ss 222 and 223 began when the taxpayer owned the legal and equitable interest in the lease of the apartment and owned the legal right to occupy the apartment which was the date of legal completion of the purchase of the lease in  January 2010.

The UT disagreed and considered that the FTT had been “wrong to find that the period of ownership could only begin when Mr Higgins had legal title to the apartment and a legal right to occupy the apartment”.  As the UT saw things, the relevant “period of ownership” had begun on the exchange of contracts in 2006.

In a unanimous decision, the CA held that the FTT was right about how the legislation should be interpreted and, hence, that the taxpayer’s “period of ownership” of the apartment for the purpose of s.223 TCGA92 did not begin until his purchase was completed.

If you would like further information on this case, please contact Keith Rushen on 0207 486 2378.

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