< Go Back Private Residence Relief - Does it apply from Exchange or Completion of Contracts? Posted: Nov 25, 2019
, the Court of
Appeal (CoA) has decided that the date of acquisition of an off-plan
property for the purpose of Capital Gains Tax (CGT) Private Residence
Relief was the date of completion, and not at exchange of contracts. Desmond Higgins v HMRC  EWCA Civ 1860 The taxpayer (DH) paid a reservation deposit for an apartment in London off-plan in 2004. A contract for sale was not made until October 2006. Although construction still had not started, a 10% deposit was paid. Due to the 2008 financial crisis, building was delayed, completion did not occur until 5 January 2010. DH sold the property in 2012 making a capital gain before relief of approximately £640,000 and he claimed Private Residence Relief. DH owned no other residence between July 2007 and January 2010.
Until completion he stayed with family, travelled or in another
apartment he owned, none of which were a main residence. HMRC denied full PRR on the basis that the property was acquired in 2006 but not occupied.
Initially the First Tier Tribunal decided the date of ownership for PRR was the date of completion, this was subsequently overturned by the Upper Tribunal who decided it was the date of exchange of contracts.
The CoA noted that:
If HMRC's argument was correct and the date of ownership ran from
the date of exchange of contracts few people buying a new home would be
able to claim PRR for the period between exchange of contracts and
completion. Although s28 of the TCGA confirms that the "period of ownership" of a
dwelling-house runs from the date of the contract for its purchase,
s222 and 223 do not refer to section 28. The mere fact that someone has contracted to buy a property will not
give him "ownership" such as could allow him to possess, occupy or even
use the property, let alone to make it his "only or main residence".
The COA allowed the appeal, concluding that date of ownership for PRR must therefore be the date of completion.
This point has twisted between the two potential ouitcomes but now the CoA has put the matter to bed. If a relatively simple point requires three full hearings of increasing intensity then what chance does the avewrage taxpayer have of interpreting the complex web of the UK tax legislation.
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