Core & Anor v HMRC: main residence tax dispute

Thanks to principal private residence (PPR) relief, you wouldn’t normally have to pay capital gains tax when you sell your main home in the UK.

But it’s important to remember you won’t be automatically exempt from the tax.

To qualify for PPR relief – also known as private residence relief – you must have lived in the property as your only or main residence at some point while you owned it.

Main residence exemption

A recent case has highlighted the issue of ‘residence’ in relation to capital gains tax (CGT).

The case centred on an appeal by Mr and Mrs Core, who had challenged HMRC’s decision to charge CGT when they sold their residential property (Green Lane) in Merseyside, in June 2014.

HMRC argued Green Lane didn’t qualify as the couple’s main home and that CGT was due on the gain they’d made in the sale.

The background to the case

Mr and Mrs Core – a married couple with school-age children – bought Green Lane in March 2013. At the time, they were living in rented accommodation (Victoria Road), where they stayed while Mr Core – a builder by trade – carried out refurbishment and extension work on Green Lane.

In February 2014, Mr Core was approached by an individual who asked if Green Lane was for sale. Although the individual was told it wasn’t for sale, the person approached Mr Core in person and by phone, offering to buy the property. In May 2014, the same person made a higher offer, provided exchange could take place immediately, which Mr Core accepted.

Meanwhile, the Core family had moved out of Victoria Road and into Green Lane around March/April 2014. They didn’t terminate their lease at Victoria Road because Mr Core was using the property as an office and storage site while his building company did work in the house next door.

The Cores moved back to Victoria Road shortly after they accepted the offer on Green Lane. That meant Mr and Mrs Core and their family had lived at Green Lane for six to eight weeks.

What was the dispute?

HMRC didn’t accept the couple’s occupation of Green Lane was of the quality and necessary degree of permanence or continuity to qualify as their private residence.

But Mr and Mrs Core argued they were entitled to PPR relief when they sold Green Lane because they’d intended to live there as their family home and that is what they did. 

The decision

The case was dealt with at a tribunal in October 2020, where Judge Zachary Citron allowed Mr and Mrs Core’s appeal. 

Mr Citron concluded the couple’s gain on the sale of Green Lane was within the PPR exemption.

Our thoughts

Principal private residence relief is a valuable relief that can lessen significant gains in properties you both own and live in. 

The appeal by Mr and Mrs Core shows that each individual situation should be considered on its own merits and that the intention of the taxpayer is a crucial deciding factor.  

Given the complexities of PPR relief, it’s always worth seeking tax advice before you sell.