This case concerned the meaning of “residence” under section 222 of the Taxation of Chargeable Gains Act 1992 (TCGA).

Background

The taxpayer inherited a house upon his father's death in 1992. His step-mother occupied the house until her death in 2007 and thereafter the taxpayer and his wife occupied the property as a private residence. The couple also owned a house which they had resided in for the past 30 years. They sought to elect the inherited property as their main residence for the purposes of availing of private residence relief on disposal of that property.

The taxpayers sought to establish that their occupation of the inherited property had the requisite degree of permanence, continuity or expectation of continuity sufficient to justify its description as “residence” for the purpose of obtaining private residence relief (PRR). HMRC claimed that this condition was not satisfied and that therefore it was not possible for the taxpayers to make an election under section 222(5) TCGA for it to be treated as their main residence for any period.

The issue under appeal was whether the inherited property was ever a “residence” of the taxpayers for the purpose of relief.

The First Tier Tribunal (FTT) stated that the burden of proof rested with the taxpayers to establish on the balance of probabilities that they were in occupation of the property as their main residence. In Springthorpe v Revenue & Customs [2010] UK FTT 582 it was noted that the test was a qualitative one and it referred to the case of Moore v Thompson in which Millet J noted that “even short or occasional residence in a property can make that place the taxpayer's residence”. In Springthorpe it was found that the quality of the occupation and the intention of the occupier were inadequate to satisfy the test in section 222 TCGA. In the decision in Metcalfe v Revenue & Customs [2010] UKFTT 619, the FTT noted that the taxpayer must establish a “degree of permanence” and an “expectation of continuity”.

Decision

The FTT found that the evidence forwarded by the taxpayers was not sufficient to establish the property as their main residence for the purpose of obtaining PRR relief under section 222 TCGA. It took into consideration such factors including bills not being addressed to the taxpayers, them never entertaining family or friends at the residence, the step-mother's furniture remaining in the house, and no repair work ever having been undertaken. The FTT adopted the language in Springthorpe and found that the quality of the occupation was such that it did not indicate use as main residence for the purpose of obtaining PRR. The appeal was accordingly dismissed.

The full text of the case is available at http://www.bailii.org/uk/cases/UKFTT/TC/2012/TC01951.pdf