Principal Private Residence: The Importance of Intention

D Morgan (TC2596)

The first-tier tribunal case dealt with the taxpayer’s claim for principal private residence relief (PPR). The area of contention was whether the taxpayer’s occupation of the property was sufficient to justify its description as his residence for PPR purposes.

The key message from the outcome of this case is that, according to the tribunal, it is a taxpayer’s intention, and not the quality of the occupation, that is more important in determing whether the relief applies.


The taxpayer purchased the property with the intention of moving into it with his fiancée, and making it their marital home. However, shortly before completion his fiancée broke off the engagement suddenly, giving no explanation.

The taxpayer, on the lack of evidence to the contrary, felt that his fiancée was merely having cold feet. He assumed that they would soon reconcile and she would move into his new house with him. He therefore went ahead with the property purchase and moved in.

Some weeks later it became apparent that they were not going to reconcile as she was seeing someone else. The taxpayer, whilst purchasing the property in his own name, had budgeted on his fiancée paying for groceries and household bills etc. As a result this left him in financial trouble and he had to assess his options.

After living in the property 3 months the taxpayer moved back in with his parents and rented the property out. The property was rented out for just under 5 years, at which point the taxpayer moved back in with the intention of selling the property. The property was then sold within 4 months.

HMRC assessed the taxpayer to capital gains tax on the gain, saying that the two periods he had stayed in the property had been temporary and it therefore did not qualify for principal private residence relief.

The taxpayer appealed.


The tribunal said the case was “extremely finely balanced”. It was their view that it is not the ‘quality’ of the occupation, but the intention of the occupier that matters when determining whether or not the property is an individual’s principal private residence.

If Mr Morgan had moved into the property fully furnished, and all the bills had been addressed to him personally, and if he had already intended to let the property, then the quality of his occupation would be irrelevant.

The tribunal accepted the taxpayer’s assertion that he had hoped, when he occupied the house, that his fiancée might return. Therefore when purchasing the property he had intended for it to become his principal private residence.

After learning his fiancée would not be returning, an early repayment charge clause in the mortgage made it clear it would have been financially unviable to sell the property straightaway. Therefore the tribunal said that it was understandable that, after he found the cost of living too high, the taxpayer decided to let the property and move back in with his parents.

The taxpayer’s appeal was allowed and he was entitled to principal private residence relief.

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