The First Tier Tribunal (FTT) decision in Piers Moore (UKFTT 433 (TC)), which was published on 22 August 2013, is another in a long line of cases dealing with claims for Capital Gains Tax principal private residence (PPR) exemption.
Mr Moore had purchased a two-bedroomed property, 110 Headlands, in November 2002, which had been let out until the last tenant vacated in November 2006. Mr Moore then moved out of his matrimonial home into 110 Headlands, taking some furniture and his clothes, and lived there until July 2007. The property was sold a month later.
It was clear that after he moved out of the matrimonial home, Mr Moore did not have any other residence available to him except 110 Headlands and the property was not put on the market until some 5 months after he had moved into the property. He paid Council Tax on the basis of single occupancy from November 2006 to July 2007 and although some of his correspondence had not been sent to his new home, one might have concluded that he had established sufficient quality of occupation to claim PPR relief on the disposal of the property.
However, the FTT looked closely at the question whether there was sufficient degree of permanence, continuity or expectation of continuity, especially in the early period of occupation, ultimately concluding that there wasn’t and therefore refusing Mr Moore’s claim for PPR on the disposal of the property.
In coming to this conclusion, the FTT looked at the following factors:
- The degree of certainty of Mr Moore’s financial affairs;
- The nature of 110 Headlands as a suitable permanent residence for Mr Moore;
- The state of his relationship with the woman he later married (accepting that there was never any realistic chance of reconciliation with his first wife).
Mr Moore had explained that there was little certainty in his financial affairs, bearing in mind his impending divorce, and that he expected to stay at 110 Headlands until his financial affairs were sorted out, which could have taken a long time. He was concerned to take care of his first wife financially, and she had placed a restriction on the title of 110 Headlands which meant that he could not readily sell the property.
The FTT accepted that a two-bedroomed property was suitable as a residence for a single man; however, his relationship with his “lady friend” (as described by the FTT) may have had a bearing on this. Mr Moore maintained that there was no third party involved in the break-up of his marriage, although their relationship developed over subsequent months leading to them buying a four-bedroomed house together in July 2007, into which they moved with her two children. This suggested that if he had the intention of setting up home with his new partner in November 2006, 110 Headland would not have been a suitable property, so there would have been no intention of permanence or continuity with regard to his occupation of the property. Mr Moore had said to HMRC, although he later retracted the statement, that he did not choose to make the property his residence because it had only two bedrooms.
Mr Moore was given specific liberty to adduce a witness statement sworn by his (then) new wife, but she did not provide evidence “no doubt for good reasons”.
The FTT cited the case of Goodwin v Curtis 70 TC 478 which looked at a situation where the occupation of a dwelling house which lacked the necessary degree of permanence, continuity or expectation of continuity to be a residence for the purposes of PPR.
That case involved the purchase of a nine-bedroomed farmhouse, with an 18 month period between exchange and completion. On the completion date the couple separated, the property having been put on the market some weeks earlier. The husband moved into the property until it was sold, after which he moved into another much smaller property he had recently purchased. There was therefore no expectation of permanence or continuity, and the property was not suitable for single occupancy (the husband had bought a much smaller property to live in).
The Moore decision is surprising in some respects, as Mr Moore did not have any other residence available to him, regardless of the nature of his relationship with his “lady friend”; he did not, for whatever reason, set up home with her in her own property; and he could not live in his former matrimonial home. Mr Moore maintained that he stayed at 110 Headlands every night, except for a few days he spent away for his work.
Despite all this, the FTT still decided that there was no permanence or continuity in his occupation of the property and the decision clearly demonstrates the need to prove not only actual and ‘main’ residence but also the intentions of the occupier in relation to any occupation. Ensuring that contemporaneous evidence exists to support all the requirements for PPR relief is, of course, best addressed prior to and during the occupation itself and, to this extent, proper planning is often vital – particularly where the occupation is likely to be for a relatively short period.