Where Principal Residence Relief (PRR) applies, a taxpayer who sells their main residence does not have to pay capital gains tax (CGT) on the sale.

A recent Upper Tribunal decision held that a homeowner could not claim PRR for the period where he was not living in the property, despite there being an exemption which can cover a period of non-occupancy while a house is being prepared for occupation.

In 2006, Mr Higgins paid the deposit on a flat at St Pancras Station which was being built by a developer. The flat was not finished until January 2010 when Mr Higgins moved in. Exactly two years after, he sold the flat. Mr Higgins claimed CGT relief for the whole period of purchase (from 2006). HMRC disagreed and charged Mr Higgins with CGT liability for the pro rata period before he moved into the property in January 2010.

The Upper Tribunal held in favour of HMRC and stated that Mr Higgins' flat was taxable from the moment he exchanged contracts, but PRR only applies from the moment he started occupying the property (subject to a statutory period for renovation which did not cover the whole period) .

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