The sale of every property is potentially taxable under the Capital Gains Tax (CGT) rules. When an individual sells their only or main residence, generally the gain is exempt from CGT due to the Principal Private Residence (PPR) relief. However, we are so used to saying this that we are in danger of forgetting the two conditions that must be satisfied for a claim to succeed.

The property must:

• not have been purchased ‘wholly or partly’ for making a gain; and
• be the individual’s only or main residence at some point of ownership or claimed to be so



Queries are most likely to arise in situations where a property has been bought and sold within a relatively short period; here HMRC will be looking at whether the taxpayer is, in reality, trading. If HMRC are not satisfied that the relief is due they will look at whether the owner had any intention of living in the property permanently and require proof that the property has been lived in as the PPR.

Recently HMRC have been targeting self-build builders, questioning as to whether the property has been built intending to be the main residence. If a self-builder repeats the process of building, moving in, selling and rolling equity gains into subsequent houses, HMRC may take the view that the self-builder has become a business and seek to tax the gains as income rather than as exempt under the CGT rules. Such a situation is more likely if the person has no other income or works in the building trade.

Proving ‘permanency’

HMRC will require proof that the property has been lived in as the PPR. However, there is no set rule as to the number of days of residency and there will be some circumstances where the ‘intention‘ has been to live ‘permanently’ but was not possible for some reason.

Practical Point

Should HMRC query a PPR claim the following may help in your appeal:

• Documentary evidence – home insurance, telephone bills, DVLA records or credit reference agency records, utility bills in the owners’ name at the property address
• The property address being on the electoral register in the owners’ name
• Receipts confirming purchase of furniture etc for the property
• Bank accounts registered at the address

A final suggestion is for the owner to introduce themselves to neighbours to let people know who lives there.