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08-07-2025

HMRC Loses £3 Million Tax Case – Important Implications for Property Sellers

A recent tribunal ruling confirms that homeowners may still claim Principal Private Residence (PPR) Relief even in high-value property transactions-provided they can demonstrate genuine occupancy.

PPR Relief is a tax exemption that applies when you sell your main residence. It ensures that homeowners are not taxed on any gain made from the sale of their primary home.

Background

A recent win for a London couple in a £3.32 million dispute with HM Revenue and Customs (HMRC) offers important guidance for property owners concerned about Capital Gains Tax (CGT) on the sale of residential property.

The couple had sold a Chelsea mansion for £27.2 million making them a substantial profit and claimed PPR relief to avoid Capital Gains Tax. HMRC challenged the claim, alleging the property had not been used as their primary residence and instead the couple’s other property in Holland Park had been their main residence. They were of the view that the couple purchased, redeveloped and sold the property for the purpose of making a gain. The First-tier Tribunal rejected HMRC’s argument and ruled in the couple’s favour, accepting that they had genuinely occupied the home as their main residence-even if only for a relatively short period.

This was evidenced through the couple hosting thanksgiving, New Year’s Eve and Chinese New Year parties at the property in Chelsea. Furthermore, the couple’s decision to transport 2000 bottles of premium wine from their Holland Park residence to the Chelsea mansion further convinced the Judge that the property was being personalised and not just a ‘venture in the nature of trade’.

Key Takeaways

The case highlights that:

  • Genuine residence matters more than duration. Even short-term occupation may qualify for PPR Relief if it can be shown to be a person’s main residence at the time.
  • Evidence is crucial to defending claims. The tribunal placed weight on documentation and witness testimony confirming the couple’s intention to live at the property as their main home. This suggests courts are open to fact-specific arguments, rather than simply assuming tax avoidance.
  • HMRC is actively challenging PPR claims. Especially in high-value cases, HMRC is scrutinising property transactions and demanding detailed proof, in an effort to maximise the amount of Capital Gains Tax HMRC are receiving. Taxpayers must be prepared to substantiate their claims with comprehensive documentation and, if necessary, witness testimony.

Contact

If you would like to discuss any of the issues raised in this article, or need advice about Capital Gains Tax or Estate planning, please do not hesitate to contact our Private Wealth Department or Property Department on 020 7625 6003 or Priya Dhokia (Head of Family & Private Wealth) by email at p.dhokia@fgdlaw.co.uk