Round the houses: intention crucial to CGT residence relief

Mr. Dutton-Forshaw owned a property on Cornwall Gardens for approximately three and a half years, but only occupied it for 53 days in the early part of that period. He originally acquired Cornwall Gardens intending it to be his permanent residence, but had to move out so that he could look after his daughter in Lymington.

The case was somewhat complicated by the fact that up to and including the time in question, the taxpayer had held an interest in a number of different properties (both in London and Lymington), some of these periods of ownership being concurrent.

The First Tier Tax Tribunal followed the key principles laid down by the Court of Appeal in Goodwin v Curtis, in particular, the fact that:

• it is necessary to consider the nature, quality, length and circumstances of the taxpayer’s occupation;
• temporary occupation at an address did not make a person resident there;
• there must be some degree of continuity or some expectation of continuity to turn mere occupation into residence; and
• the question of when occupation becomes residence is one of fact and degree.

Prominence was given by the Tribunal to the third point of turning occupancy into residence, although they also made clear that this test should not be overstated, as it was only one of the factors to be taken into account.

The tribunal also agreed that although the taxpayer owned several other properties at the relevant time, he occupied none of them and so had no other property that might have been considered to be his residence. On this point, although it was not conclusive, they also concluded that it would be a ‘surprising result’ on the particular circumstances if not one of the properties held by the taxpayer was considered to be his private residence at that time.

Overall, the Tribunal found that based on the evidence presented to them, the ‘nature, quality, length and circumstances’ of the taxpayer’s occupation of Cornwall Gardens were sufficient to qualify as residence, and as the taxpayer had no other residence at that time, private residence relief and lettings relief were both available.

The importance of intention

The FTT found that although at the time of acquiring Cornwall Gardens there was a distinct possibility that Mr. Dutton-Forshaw might have to relocate to look after his daughter, his intention was to reside there. Evidence that the Tribunal took into account included contemporaneous e-mails to family and colleagues, as well as actions taken by the taxpayer which would not have been expected had he not intended to reside there (for example, obtaining a parking permit from the local Council, which he gave up when he left the property).

The need for intention has been stressed in a number of recent cases decided both in favour of and against the taxpayer. This is a well tested area before the courts, although as can be seen from this case, even where the period of occupancy is short, if the intention is there and the facts support that intention, the property can still be the main residence for CGT purposes.