Why proof of occupation is vital for PRR claims

Published: 12th February 2024

The sale of your main home doesn’t usually attract capital gains tax (CGT) charges. This is due to the availability of private residence relief (PRR), which can apply where a property is occupied as your main home with a degree of permanence or continuity. In a recent FTT case, the taxpayer (S) sold a property in 2016 and claimed PRR, but HMRC disallowed the claim and sent a CGT bill for over £43,000.

S claimed that he had lived at the property between 2010 and 2013, with his girlfriend whom he married and, later, divorced. A friend of his wife also lived in the property with them. Following the divorce, he moved back in with his parents. The only evidence S could produce to show he had lived at the property were mortgage statements, water bills, service charge statements and a letter about a guarantee on the shower. He did not provide any witness statements from anyone who could confirm he lived at the property, such as the lodger, ex-wife or neighbours. S worked with his father and said he saw no need to change his address as his father could bring any post daily. In addition, he received most information (including from his banks) online and so physical post was not important. S said he did not register to vote at his new address because he preferred to vote in the constituency of his parents’ home where his vote carried more weight.

The FTT found that there was “remarkably little evidence” from S to demonstrate a period of residence in the property of over three years and he did not appear to make significant effort to show that he had lived in the property. As the evidence provided was consistent with property ownership only, the appeal was dismissed. Had S simply updated his address for all correspondence, it is unlikely that HMRC would have challenged the claim.