Capital gains tax

Appeal allowed on principal private residence relief

The First-tier Tribunal (FTT) has found that private residence relief (PRR) was available on the sale of part of a garden, though it had been fenced off before sale and work had started to construct a new property.

In 1995, a taxpayer purchased a property in Oxfordshire for £120k. In 2015, he sold less than half a hectare of the garden to a property developer for £295k. The land had been part of the taxpayer’s garden, but HMRC disputed whether or not it still was at the time of disposal.

Permission to start work was given in a letter before the sale, and he erected a fence around the land in question so work could begin. In September 2016 contracts of sale were completed, with part consideration being paid on the land sale, and part when the additional house had been built.

The taxpayer argued that the date of disposal was the date of the letter giving permission to start work. At that date the land was part of his garden, so PRR applied. Alternatively, he argued that the letter put the land under a constructive trust, or that the land had been appropriated to trading stock.

The FTT ruled that the letter from June 2016 was not a contract for the disposal of the land, however there was an appropriation to trading stock on this date. At this date, the property was still a part of the taxpayer’s garden and therefore PRR was available.

Nunn v HMRC [2024] UKFTT 298 (TC)

From Tax Update May 2024, published by Evelyn Partners LLP

Income tax

Upper Tribunal dismisses HMRC’s appeal against closure notices

The Upper Tribunal (UT) has agreed with the ruling made by the First-tier Tribunal (FTT) against HMRC in relation to closure notices relating to the transfer of assets abroad (TOAA) rules. 

The taxpayers, three members of the same family, were subject to longstanding enquiries around the TOAA rules.

The taxpayers applied for closure notices. HMRC argued that it required further information before it could issue these, as it was as yet unable to set out how the TOAA charge would arise. It asked for the application to be dismissed, and the taxpayers to comply with information notices asking for extensive details of financial transactions to do with the offshore entities.

The FTT directed HMRC to issue closure notices. It considered the transactions that HMRC was currently suggesting the TOAA rules applied to, and found that none of the taxpayers were the ultimate recipients of and did not benefit from a £40m distribution. HMRC was given six weeks from the date of the decision to issue the closure notices.

HMRC appealed the decision, arguing that the FTT failed to apply the relevant legal principles and the case was heard by the UT. The UT found that there was no error of law and stated that the FTT took account of a variety of factors when reaching its conclusion.

Hitchins v HMRC [2024] UKUT 114 (TCC)

From Tax Update May 2024, published by Evelyn Partners LLP