Guidance on Meaning of ‘Residence’ in Tax Context

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Flat96In tackling the thorny issue of what does and does not constitute ‘residence’ in the context of tax, the First-tier Tribunal (FTT) has rejected a couple’s arguments that the sale of an investment property was free from Capital Gains Tax (CGT) on the basis that they lived in it as their only home for 25 days before selling it.

The couple had lived in a five-bedroom home prior to disposing of it and moving into the flat, which they had owned for several years and which had previously been rented out to tenants. Contracts for the sale of the flat were exchanged eight days after they took up occupation and they moved out 16 days after that, when the sale was completed.

The couple argued that the flat had, during their period of occupation, been their ‘only or main residence’ within the meaning of Section 222 of the Taxation of Chargeable Gains Act 1992 and that the sale price was thus free from CGT. That claim was disputed by HM Revenue and Customs (HMRC).

In dismissing the couple’s appeal, the FTT ruled that the brief period during which they had lived in the flat did not constitute ‘residence’. Whilst accepting that the flat had been the couple’s only home during the 25-day period, the FTT found that, at the time that they moved in, they were aware that their occupation of the flat would only be temporary and that a sale of the property was proceeding.