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St Pancras Station principal private residence ruling

The Court of Appeal has ruled over when a period of ownership begins in a long-running case concerning the purchase and sale of a residential property in the St Pancras Station development.

December 2019

The case centres on when ownership of a home starts for the purpose of principal private residence relief; is it on exchange or completion? The decision of the Court of Appeal has been published.

Mr Higgins sold his home in the St Pancras development in the old St Pancras Station Hotel and claimed principal private residence relief on the gain. HMRC did not allow the claim and assessed Mr Higgins to capital gains tax of more than £61,000.

The problem with the claim was that Mr Higgins bought his apartment off plan in October 2006. He paid a deposit on exchange and a further deposit in March 2007 with the balance due on completion.

However, the financial crisis in 2008 caused problems for the developer and work did not start until November 2009 and in December 2009 the developer advised Mr Higgins that completion would be January 2010. Mr Higgins lived in the apartment from January 2010 until January 2012 having sold the apartment.

Mr Higgins had sold his previous home in July 2007 and in the period between then and January 2010 he had no other dwelling.

The First Tier Tribunal said that for the purpose of s222 and 223, Tax & Capital Gains Act 1992 (TCGA 1992), Mr Higgins’ period of ownership began on legal completion of the contract in January 2010 when he was first able to occupy the property and ended on completion of the sale in January 2012. The relief was allowed.

The Upper Tribunal disagreed. It said the period of ownership began on the exchange of contracts in October 2006 and ended on the sale and the gain accrued over that period but the apartment only qualified for relief from occupation in January 2010 to the date of sale.

The point looked at in detail by the Court of Appeal was the meaning of the words ‘period of ownership’ in s223, TCGA 1992. If the period started in January 2010 then the apartment was his main residence throughout the period of ownership and thus was fully relievable.

After deliberations there was a unanimous decision that January 2010 was the start date for s223 and thus no capital gains tax was payable.

We need to wait and see what steps HMRC may take next; HMRC could appeal, it could just accept the decision and move on or it could accept the decision and then amend the legislation such that it says what HMRC understood it to say up until now. 

This article first appeared in the ICAEW Tax Faculty’s TAXline.

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