The recent First Tier Tribunal decision in A J Clarke demonstrates the importance of having good supporting evidence to back up a claim for principal private residence (PPR).
This decision concerned claims for PPR on properties acquired following a marital breakdown and subsequent divorce. There were a number of factors that could have dissuaded the tribunal from allowing the PPR claim but it was persuaded by the evidence and prepared to take a pragmatic view in the light of all the surrounding circumstances.
First, when the husband moved out of the matrimonial home he bought a new property with a short term business bank loan, which does not seem to indicate any permanence to the arrangements. However, the tribunal accepted that he took this course because it was much quicker to arrange and he had to move out of the matrimonial home and provide accommodation for his daughters as quickly as possible.
Secondly, correspondence was not addressed to the new house, but continued to be addressed to the matrimonial home, which was a farm with commercial units in which the husband carried on his business. The postman knew to deliver his post to the commercial unit.
Thirdly, having bought the new property, the husband had intended to sell the land attached to the property, but having obtained planning consent for a new dwelling on that land his business partner suggested that he develop the new property himself. He therefore sold the original house having lived there for a relatively short period and started to develop the new house. Subsequently he sold the new house and moved back to the farm following a suicide attempt by his wife. This scenario may not appear helpful, but given the circumstances and the evidence that was produced to support the sequence of events the tribunal “found it credible” and allowed PPR on the sale of both houses.
This case illustrates the importance of presenting credible evidence, even where the circumstances may not appear conducive to making a successful claim to PPR. Advisers should be mindful that HMRC look very closely at PPR claims where the person owns more than one property, and should make sure that their clients are aware of the possibility of challenge and what evidence is likely to be required.