I am increasingly reluctant to comment on cases involving the CGT main residence exemption as the decisions of the tribunals on the subject are so numerous and so inconsistent that it is quite impossible even to guess the result on any given set of facts. Accordingly, they are more likely to mislead than to inform. However, the recent case of Eyre v HMRC [2025] UKFTT 461 (reported in Tax Journal, 16 May 2025) had features of particular interest.
We will all be familiar with clients (and others) who buy a house, live in it, do it up and sell it, moving on to the next one to repeat the process and so on, claiming the PPR exemption each time. We tax nerds get a bit nervous at this because it looks suspiciously like a trade. But the point never seems to be raised by HMRC.
It was therefore interesting to read the case of Eyre in which HMRC did run the argument. The facts were not extreme. Mr and Mrs Eyre lived in House A; they bought House B, demolished it and built a new House B to be their replacement main residence, but for various reasons moved out after about nine months.
The trading argument was conventional: did they buy House B with the intention of selling it at a profit? No. How did the badges of trade fit into their circumstances, and so on. They didn’t. So the trading argument failed.
But what about capital gains tax? Even if it is not a trade, TCGA 1992 s 224(3) can bring such a profit into charge to CGT because it says that the PPR exemption does not apply ‘to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it’.
And again, although this seems so wide as to catch almost everybody who buys a house, it is rarely invoked. And for some reason it was not argued by HMRC in this case either. HMRC confined their challenge to the exemption by arguing that House B was not their main residence.
However, the FTT held that it was. They said that the ‘nature, quality, length and circumstances’ of Mr and Mrs Eyre’s occupation of House B involved ‘some assumption of permanence, some degree of continuity, some expectation of continuity’ and they were entitled to the exemption when it was sold.
I am increasingly reluctant to comment on cases involving the CGT main residence exemption as the decisions of the tribunals on the subject are so numerous and so inconsistent that it is quite impossible even to guess the result on any given set of facts. Accordingly, they are more likely to mislead than to inform. However, the recent case of Eyre v HMRC [2025] UKFTT 461 (reported in Tax Journal, 16 May 2025) had features of particular interest.
We will all be familiar with clients (and others) who buy a house, live in it, do it up and sell it, moving on to the next one to repeat the process and so on, claiming the PPR exemption each time. We tax nerds get a bit nervous at this because it looks suspiciously like a trade. But the point never seems to be raised by HMRC.
It was therefore interesting to read the case of Eyre in which HMRC did run the argument. The facts were not extreme. Mr and Mrs Eyre lived in House A; they bought House B, demolished it and built a new House B to be their replacement main residence, but for various reasons moved out after about nine months.
The trading argument was conventional: did they buy House B with the intention of selling it at a profit? No. How did the badges of trade fit into their circumstances, and so on. They didn’t. So the trading argument failed.
But what about capital gains tax? Even if it is not a trade, TCGA 1992 s 224(3) can bring such a profit into charge to CGT because it says that the PPR exemption does not apply ‘to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it’.
And again, although this seems so wide as to catch almost everybody who buys a house, it is rarely invoked. And for some reason it was not argued by HMRC in this case either. HMRC confined their challenge to the exemption by arguing that House B was not their main residence.
However, the FTT held that it was. They said that the ‘nature, quality, length and circumstances’ of Mr and Mrs Eyre’s occupation of House B involved ‘some assumption of permanence, some degree of continuity, some expectation of continuity’ and they were entitled to the exemption when it was sold.
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