Some 20 years ago Mr Charles Goodwin bought a nine-bedroomed farmhouse. He advertised it for sale before he completed its purchase, lived in it (alone) for the 32 days which elapsed between purchase and sale and had the chutzpah to claim exemption from CGT on the £100,000 profit on the basis that he was selling his “only or main residence”.
Unsurprisingly HMRC and later the commissioners and the courts bent over backwards to find a way to deny the relief. They did this principally by considering what the courts had had to say about “being resident” in the wholly different contexts of electoral law and the taxation of non-UK-resident individuals and persuaded themselves that CGT main residence relief requires some degree of permanence. The exact degree was left open; but whatever it was, it was lacking in Mr Goodwin’s case.
However shaky the legal foundations, few would say that the courts erred in denying Mr Goodwin his tax relief.
Fast forward to Mr Piers Moore, whose case was recently heard by the First-tier Tax Tribunal.
Mr Moore’s marriage was in difficulty. He permanently left the family home and moved into a small investment property which he had owned for some time and which had become vacant. There was no question but that it was his only home until he sold it nine months later. Most people would have said that it was his residence for that period, especially as the only alternative – that he was “of no fixed abode” seems absurd. So what was the problem?
The problem was the earlier precedent of Goodwin v Curtis. Mr Moore, you see, formed an attachment to a lady destined to become the second Mrs Moore and when he left his temporary home it was to move into a property they had jointly purchased. And since Mr Moore could not prove that during his time in the property he “did not have any serious expectation of being able to move” the Tribunal held that his occupation of the property lacked the necessary degree of permanence to count as a “residence” for CGT purposes and exemption was denied.
The decision is, of course, outrageously wrong. The cobbling together from irrelevant case law of the “degree of permanence” test might have been just about justifiable as a means of getting to the “right answer” in Goodwin. Its misapplication to the utterly different circumstances of Mr Moore beggars belief.
As a First-tier Tribunal decision, the case sets no binding legal precedent. But we doubt that that will stop HMRC from citing it, and any taxpayer disposing of a property which has in any sense been his home only on a temporary or stop-gap basis will want to consider carefully HMRC’s likely approach.