Tribunal finds that taxpayer who bought and sold three properties in quick succession was not trading, writes Harry Smith.
Taxpayer purchasing, renovating and selling properties allowed private residence relief on capital gain and held not to be trading as property developer for tax purposes, a tribunal has ruled.
Gary Ives (the Appellant), who had trained as a plasterer and had also carried out work as a general builder and painter and decorator, bought and sold, in quick succession, three residential properties, having made substantial improvements to each. The sale of each property took place shortly before the purchase of the next. In consequence of the improvements made to the properties (which included basement conversions and turning one of the properties, which had previously been converted into flats, back into a single house), the Appellant made substantial capital gains. During the building works, he and his son had lived in the properties, in some cases effectively camping in them without adequate facilities while building work was in progress.
The Appellant claimed private residence relief (PPR) from capital gains tax in respect of the sale of each of the three properties. HMRC enquired into the Appellant’s tax returns and concluded that he had been trading in residential properties, and issued closure notices on the basis that the gains on the sales of each of the properties constituted trading profits and were therefore taxable as income. HMRC also raised assessments in relation to historic rental income said to have been received by the Appellant in relation to another property. The Appellant appealed to the FTT.
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