First-tier Tribunal (Tax)

[2011] UKFTT 49 (TC)

TC00927

Appeal number: TC/2010/01501

Capital Gains Tax – whether principle private residence exemption applies – no – whether job related accommodation exemption applies – no –assessment confirmed

FIRST-TIER TRIBUNAL

TAX

MISS ALEXANDRA BRADLEY Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: MICHAEL S CONNELL (TRIBUNAL JUDGE) MICHAEL ATKINSON (MEMBER)

Sitting in public at York House York Place Leeds LS1 2ED on 13^th October 2010

Mr James Bradley for the Appellant

Mr Burke, Higher Officer of HMRC, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       This is an appeal against a decision by HMRC to assess the Appellant on Capital Gains arising on the disposal of flat 27 The Hastings Lancaster (the property), the taxable Capital Gain being £10,091 for the year 2003/04.

2.       The property was purchased by the Apellant’s father in 1992 and then transferred to the Appellant on the 2 October 1998 when the property had a market value of £46,500. The property was sold 5 years later for the sum of £69,000 realising net sale proceeds of £67,666. After allowing non business asset taper relief the gain of £21,166 was reduced to £17,991. After further deducting the applicable annual exempt amount of £7,900 the amount liable to Capital Gains Tax was £10,091.

3.       The Appellant argues that Capital Gains Tax is not payable because –

·       the principle private residence exemption applies

·       the property was job related accommodation and that consequently no taxable benefit arose

4.       The background is that the Appellant’s father Mr James Bradley purchased the property in 1992 and lived there until 1996. It then became a holiday home until 1997. In 1998 the Appellant intended to live in the flat whilst studying at Lancaster University but she decided against this and instead undertook a teacher training course in Leeds. On 2 October 1998 on the advice of his solicitor Mr Bradley transferred the property to his daughter when the market value of the property was £46,500. The property was rented out until 2002 and sold on 21 November 2003.

5.       The Appellant’s contentions are that the flat was her only main residence from 1998 to 2003 and although she spent virtually no time living in the flat this was due to her being in full time education at Leeds University between 1998 and 2002. It was she says her intention to live in the flat whilst studying at Lancaster University which she decided against, and again it was her intention to live in the flat after leaving Leeds University in 2002, but she obtained a teaching post in Leeds and therefore did not move back to Lancaster. The Appellant contends that there should be no assessable gain on the sale proceeds of the property because either the principle private residence exemption applies or the property was job related accommodation.

6.       To qualify for private residence relief the property must at some stage during the Appellant’s ownership have been occupied by her as her only or main residence. Residence in this context is given its ordinary meaning. For an individual this is the dwelling in which that person habitually lives: in other words, their home. Ownership of the flat is not sufficient for it to be a main residence. In this case the property, a one bedroom flat, was let to tenants throughout the period of ownership. No periods of vacancy coincided with the Appellant’s holidays from university and therefore this effectively prevented the Appellant from occupying the flat and at no stage did the Appellant reside in the property with any degree of permanency. She was undertaking a full time degree course at Leeds University and during holiday periods she did not reside in the property, either staying with her parents or holidaying abroad.

7.       Job related accommodation relief is only available to employees who are required to live in job related accommodation. It generally applies to the kind of employment where it is customary for living accommodation to be provided and the living accommodation enables the person to better perform their duties, or if it is customary for such accommodation to be provided.

8.       Capital Gains Tax applies to the sale of property generally. However an individual’s only or main residence is exempted by the relief given in S. 223 (1) TCGA 1992. However it is not enough merely to own a dwellinghouse to qualify for the relief. The property must have been occupied as a main residence and in this instance private residence relief is not available to the Appellant because during her ownership the property was never her main residence.

9.       S. 222 (8) TCGA 1992 provides a definition of what “job related” means –

“(8) If at any time during an individual’s period of ownership of a dwellinghouse or part of a dwellinghouse he –

(a)  resides is the accommodation which is for him job related …, and

(b)  intends in due course to occupy the dwellinghouse or part of the dwellinghouse as his only main residence,

this Section ….. shall apply as if the dwellinghouse or part of the dwellinghouse were at that time occupied by him as a residence.

(8A) … for the purposes of subsection (8) above living accommodation is job related for a person if –

(a)  it is provided for him by reason of his employment …in any of the following cases -

(i) where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation”

10.    The sub-section clearly requires residence and intention and that the accommodation is job related. Intention in itself is not sufficient. No evidence has been provided to show that the Appellant occupied the property by reason of her employment.

11.    For the above reasons the Tribunal determined that the Appellant was not at any time resident at 27 The Hastings Greaves Road Lancaster. The Tribunal dismissed the appeal and confirmed the 2003/04 assessment as £2,306.18, £287.98 relating to rental income (not under appeal) and £2,018.20 relating to Capital Gains.

12.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

M S CONNELL

TRIBUNAL JUDGE

RELEASE DATE: 14 JANUARY 2011