A married couple bought their dream house, a grade II listed Georgian country house in a 20-acre estate with 12 bedrooms, grand reception rooms, a chapel, four cottages and a formal garden. The house was in a state of disrepair and the roof had collapsed in one wing. The couple spent large sums of money loving restoring the property but their business ran into difficulty and they divorced though both continued living in separate parts of the house. The main CGT issues were:
- PRR only exempts land of up to 0.5 of a hectare unless a larger area is appropriate to the size and character of the house,
- Whether the four cottages could be considered to have been occupied as part of the residence
- The extent to which the main house was occupied as a residence given that parts were derelict or otherwise uninhabitable for part of the period of ownership
- The owners had not kept full records of what they had spent on the restoration
Apart from the legislation itself there are a number of case law decisions on whether or the extent to which PRR is available on the sale of a property. I assisted the accountants acting for the couple to put together a detailed claim for relief which included estimates of the sums spent and statements concerning the application of PRR which HMRC accepted without question and so no CGT was payable. What this case shows is that providing detailed information and a plausible case to HMRC considerably reduces the possibility of challenge: presentation is key.