As a number of cases have shown, obtaining PRR is not as straightforward as it seems. The starting point for any private residence relief (PRR) claim is that the property must have been the taxpayer's home. It is not enough to say, "It was the only property I owned at the time".
Over the past couple of years, a number of tax tribunal cases have focused on the quality of residence, rather than the quantity (time spent). A consistent theme in these cases is the evidence available to support a taxpayer's claim of occupying a property as a home. This includes, for example, utility bills, council tax, postal arrangements and the voters' list.
Example cases
Taxpayer produces letter from HMRC as evidence
In one case, HMRC noted that the taxpayer appeared on the voters' list as resident at his parents' address during the period under review. HMRC also alleged that all post went to and from the parents' home and it clearly helped the taxpayer's case when he was able to produce correspondence proving HMRC had in fact written to him at the property.
Inherited property not a home
In another case, the taxpayers owned a home and inherited a property a few miles away. They submitted an election claiming the inherited property was their main residence for a time. However, the tribunal decided it was never used as a residence saying, "Occupation of a property, or merely staying in a property, is not sufficient on its own to make the property a residence for PRR purposes. It must be occupied in such a manner that it becomes a person's home."
Residence as a stopgap?
HMRC argued that the occupation of a property for ten months, while the owners got their next residence ready for occupation, was a 'stopgap'. But the tribunal accepted the taxpayers' evidence proving the new property wasn't fit to live in when purchased and the first property had indeed been used as their residence.
Home only temporary
A taxpayer lived in the property for six months but instructed an agent to sell the property shortly before she moved in. The tribunal ruled that the property was only ever going to be a temporary home and never her residence.
Incriminating evidence
A taxpayer said he lived in a property while refurbishments took place. However, it transpired that he had an exemption from council tax on the basis that the property was uninhabitable; initially there were no kitchen or bathroom facilities, and the electricity bills were minimal. Not surprisingly the tribunal concluded that it had not been his home.
Keep a record
It is clear that HMRC is willing to argue cases where it considers insufficient 'quality' of residence has been established. The key to establishing this 'quality' is being able to provide evidence, so it is important to retain proof to support any PRR claim.
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