Wagstaff v HMRC [2014] UKFTT 043 (TC) – another CGT PPR relief case

The First-tier Tax Tribunal has allowed a claim for principal private residence relief (PPR) in which a couple bought their mother’s flat subject to her right to continue occupying it.  The tribunal decided this was an interest in settled property, i.e. trust property under s.68 of the Taxation of Chargeable Gains Act 1992.

This is from the case report and outlines the background to this matter:

6. The Flat was purchased by Mr Wagstaff’s mother (“Mrs Barbara Wagstaff”), in
1990. On 6 February 1996 she sold and transferred the Flat to the Appellants for
30 £45,000. The price was based on a valuation report of 14 October 1994. The report
was not before us and we heard no evidence regarding the valuation either at the time
that it was given or in respect of the sale which took place some 15 months later.
HMRC had nevertheless accepted the price as an arm’s length price.

7. The sale was subject to the terms of an agreement of 6 February 1996 (“the
35 Agreement”) between the parties under which Mrs Barbara Wagstaff was entitled to
continue living at the flat at no cost for the remainder of her life or until her
remarriage, subject to payment of £5,000.

8. Mrs Barbara Wagstaff continued to occupy the property until 2005. In August
2005 she had knee replacement surgery, following which she returned to the Flat.
40 Within a week, however, she fell down stairs, seriously injuring the replacement joint, 3
and had to be returned to hospital. She was not released from hospital until
November 2005 when she went to live with the Appellants pending the arrangement
of more suitable long term accommodation. The Flat remained available for her use
with her furniture and belongings in situ until she moved into a new single storey,
5 stair-free home in June 2006. Thereafter the Flat remained empty until it was sold (by
way of an arm’s length third party sale) with her agreement on 16 March 2007.”

The taxpayers submitted a claim under section 225 of TCGA 1992 on the basis that their ownership of the flat was subject to a trust and the flat was settled property which qualified for PPR.   HMRC refused the taxpayers’ claim for PPR.

The full report can be found here

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