Capital Gains Tax Update:

Higgins vs HMRC

The court of appeal has declared that for a homeowner, the period of ownership begins at the date of completion.

In the recent case of Higgins vs HMRC, Higgins had entered into a contract for a 125-year lease for an apartment on 2nd October 2006, which was due to be built within the old St. Pancras Station Hotel in London. At the date of the contract, as per the First-tier Tribunal, the apartment was classed as “a space in a tower”. Delays to construction occurred due to the 2008 recession and work did not begin until November 2009. The completion date of the apartment was on the 5th January 2010, this is the date that Higgins eventually moved in and Higgins had no contractual right to occupy the property until this date.

HMRC claimed Higgins was due to pay over £60,000 in capital gains tax as they believed he was not covered by Private Residence Relief (PRR) for the period between entering into the contract for the apartment and the date Higgins moved in, as they claimed it had not been his main home.

HMRC’s argument was that as per the “literal rule” of interpretation, the words “period of ownership”, meant the period between entering into the contract, i.e. 2nd October 2006 and the date the Higgins sold the apartment. For Capital Gains purposes, section 28 of the Taxation of Chargeable Gains Act 1992 confirmed their interpretation, that an asset is disposed of and acquired under a contract, the time at which the disposal and acquisition is made, is the date at which the contract is made.

The Court of Appeal disagreed, as exchange and completion usually do not take place on the same day. The judge’s view was that an ordinary homeowner would not usually benefit from full relief from capital gains tax. The following statement made by the First-tier Tribunal was agreed upon by the judge.

 “To say the period of ownership begins when a contract to acquire a dwelling is entered into, at which time it would be highly unusual for a purchaser to have a right to occupy, would be perverse in the context of providing relief to individuals for gains realised on the sale of a private principal residence”.

Therefore, the appeal was granted. This case is an example that the period of ownership for Private Residence Relief (PRR) begins at the date completion, in this case, 5th January 2010, rather than the exchange date of 2nd October 2006, to allow full tax relief for ordinary homeowners.

Please also see our blog on the changes to Private Residence Relief and Lettings Relief that are effective on the 6th April 2020, the link is provided below.

If you would like more information on Capital Gains Tax on the disposal of a property, please get in contact with us via the following:


George Laingchild PJCO Peter Jarman
George Laingchild
Charles Lyell

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