HMRC v Higgins

[2018] UKUT 280 (TCC)

18th June 2018

Upper Tribunal (Tax and Chancery)


The Upper Tribunal has clarified the law on the ‘period of ownership’ for which Capital Gains Tax relief is available on the disposal of a main residence.


In 2006 Mr Higgins exchanged contracts to purchase an off-plan apartment in the former St Pancras Station Hotel in central London for a purchase price of £575,000. A 10% deposit was paid, with a further 10% desposit payable in 2007, after which Mr Higgins could sub-sell the apartment if he chose.


Construction work was delayed by the credit crunch and eventually began in 2009, being substantially complete in December 2009. Completion of the purchase took place on 5 January 2010, after which Mr Higgins occupied the property as his main residence until 15 December 2011, when he exchanged contracts for a sale at £1.215 million. It was accepted that between 2007 and 2010 Mr Higgins had no other dwelling which was his main residence.


s.222 TGCA 1992 provides that no gain is chargeable if attributable to the disposal of a dwelling house ‘which is or has at any time in [the taxpayer’s] period of ownership been, his only or main residence’. S.223 provides that where the property has only been a main residence for parts of the ‘period of ownership’, then relief applies to the fraction of the gain attributable to that part.


Separately, s.28 TGCA provides that where an asset is disposed of and acquired under a contract, the disposal is deemed to be made at the date of the contract and not the date of completion.


Mr Higgins argued that the ‘period of ownership’ ran from January 2010 when completion took place, until the exchange of contracts for sale, so that he was entitled to relief for the entirety of the gain. HMRC argued that the period of ownership ran from 2006, so that only part of the gain was subject to relief.


The Upper Tribunal Held that, applying s.28 TGCA, the ‘period of ownership’ commenced when unconditional contracts for purchase were exchanged in 2006 and ended when they were exchanged for the sale in 2011. The purpose of s.222 was to restrict the gain where the asset is not the taxpayer’s main residence for the whole of the period, and it was not absurd or unreasonable to apply the deeming provision in s.28. The case of Jerome v Kelly [2004] 1 WLR 1409 – which held that s.28 did not apply to the substantive liability to tax - could be distinguished. Accordingly, Mr Higgins was only entitled to relief in respect of part of the chargeable gain.


Mrs Justice Rose; Judge Jonathan Cannan

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