Private residence relief (“PRR”) was first introduced over 50 years ago and is one of the more widely known tax reliefs, providing relief from capital gains tax ("CGT") on the sale of your home. That said, there has been contention over the definition of the terms “period of ownership” and “periods of occupation”, both of which are crucial for determining if PRR can be applied. Last year we wrote a blog on the case of Higgins v HMRC where the Upper Tribunal held that the period of ownership for PRR purposes starts from the date the contract for purchase was signed, even though the property in question had not yet been built. Mr Higgins has appealed his case to the Court of Appeal who has now reversed the Upper Tribunal�...

Stamp Duty Land Tax ("SDLT") is payable by the buyer on the purchase of land and property in England and Northern Ireland. The rate at which SDLT is charged is determined by whether or not the property is "residential" property, which is defined in the legislation as a building that is: Used or suitable for use as a dwelling; or In the process of being constructed or adapted for such use. The rates of SDLT for residential property are higher than those for non-residential property, plus an additional 3% surcharge may also apply where the purchaser already owns residential property. Therefore, it is important that the nature of the property is correctly identified. In P N Bewley Ltd v HMRC (2019), the First-Tier Tribunal con...

Certain taxpayer expenditure can qualify for tax relief, and these amounts are known as deductible payments. The payments are deducted from income when calculating taxable income, effectively saving tax at a taxpayer’s marginal rate. For example, if a taxpayer pays tax at a marginal rate of 40%, they will  have saved 40p for every £1 of the payment they pay in the tax year. Interest paid on qualifying loans is a deductible payment, however there is a cap on the amount that may be relieved each tax year.  The total amount which can be deducted is the greater of £50,000 or 25% of adjusted total income (being total income less payroll giving and gross pension contributions paid). Qualifying Interest Where a loan is a qualify...

Whether a property is residential or non-residential for Stamp Duty Land Tax ("SDLT") purposes is not always clear cut, and this will affect the tax payable and also the reliefs/exemptions that might apply. Residential rates can be as high as 15% (where the 3% surcharge applies), whilst non-residential rates top out at 5%. Mixed use properties (used for both residential and non-residential purposes) are subject to non-residential rates. In light of the different rates and reliefs that can apply, it is crucial that the nature of the property is correctly identified at the time of purchase. HMRC has recently clarified their views and guidance on what constitutes residential property for SDLT purposes - some of the points discussed ar...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...

Principal Private Residence ("PPR") relief is one of the more widely known tax reliefs and can exempt an individual from capital gains tax ("CGT") on the sale of their home. The level of PPR relief available is calculated by reference to the “period of ownership” and the “period of occupation” on a pro rata basis. With this in mind, where an individual has lived in their home as their main residence throughout the period of ownership, then a liability to CGT should not arise on a sale. In HMRC v Higgins (2018), the Upper Tribunal considered when the period of ownership commenced for an off-plan purchase of an apartment. The UT reversed the First-Tier Tribunal’s decision and held that the period of ownership started from t...

Since the introduction of the requirement to file a Non-Resident Capital Gains Tax (“NRCGT”) return on the disposal of UK property, several cases have been brought against HMRC at Tribunal where taxpayers (unaware of their compliance requirements) have failed to file a NRCGT return on time. The cases have all concerned whether the taxpayer’s ignorance of the law amounts to a reasonable excuse for not filing a return by the deadline. (Further information regarding the requirements of non-UK residents on selling UK residential property can be found here). In the latest two cases Gater v HMRC (2018) and Wickenden v HMRC (2018), Judge Thomas and Judge Beare respectively ruled in favour of the taxpayer. Judge Thomas has rule...

In our previous blog NRCGT & Ignorance of the Law – Where are we now? (2 July 2018), we set out a series of cases where various judges came to differing conclusions over whether ignorance of the law was a reasonable excuse for failing to file a Non-Resident Capital Gains Tax (“NRCGT”) return on the disposal of UK property by the due date. (Further information regarding the requirements of non-UK residents on selling UK residential property can be found here). Since the publication of our last blog, Judge Thomas has ruled on a further case and reinforced his position that ignorance of the law can be a reasonable excuse for failure to submit a NRCGT return, thereby allowing a taxpayer’s appeal against HMRC’s penalty. In...

The First Tier Tribunal ("FTT") has found that HMRC’s application Extra Statutory Concession ("ESC") D49 is incorrect, and has suggested that guidance should be revised to reflect the "true position". The decision would provide a more robust application of tax relief to the period before moving into a property that is an individuals main residence, where the relevant conditions are met. Background Principal Private Residence Relief ("PPR") provides relief to individuals from capital gains tax ("CGT") where they dispose of a dwelling house which is used as their only or main residence. The rules of the relief also provide for deemed periods of residence. In addition to these rules, HMRC can apply ESC D49 which provides additional ...

The Sunday Times has reported that HM Revenue & Customs are set to investigate individuals who they believe may have sold a second home and/or rental property but did not report any capital gains tax ("CGT") on their tax returns. Letters will be sent to 1,500 individuals that HMRC has identified as having sold property during the 2015/16 without declaring a CGT liability. The letters will invite taxpayers to explain why they haven't paid the CGT that HMRC’s computer models suggest they may owe.  Failure to reply could result in a formal investigation and increased penalties. If you have any doubts about your tax affairs, then you should speak to a tax professional to ensure you are complying with the law. If you have undi...