Desmond Higgins and the Commissioners for HMRC

Desmond Higgins and the Commissioners for Her Majesty’s Revenue and Customs, [2019] EWCA Civ 1860.

Capital Gains Tax (CTG) is always a factor to bear in mind when tax planning for a house purchase. In the case of Higgins v. HMRC, Higgins had purchased off-plan from a developer, exchanging in 2006 when the flat was as yet unbuilt and just a “space in a tower”.

He completed the purchase and occupied the house from 2010 (at the point it was build complete). He then sold in 2012 and, in challenging a CGT bill of £63,383, claimed principal private residence relief (PPR) on the basis he had occupied the property as his main residence from completion of the purchase until completion of its sale in January 2012.

He was successful at First Tier Tribunal, but HMRC appealed to the Upper Tribunal which reversed the decision. Higgins then took the case to the Court of Appeal.

HMRC argued that Higgins should be denied full PPR because he had not occupied the flat for the whole period of ownership, which, it argued started from exchange of contracts.

The central argument focused on by the Court of Appeal, was the interpretation of the meaning of “period of ownership” set out in section 223 of the Taxation of Chargeable Gains Act 1992 (TCGA).

The Court of Appeal ruled that this period did not begin until 5 January 2010 when Higgins could actually complete and occupy the property, and as such the property was his main residence “throughout the period of ownership” and so no CGT would be payable.

One of HMRC’s objections to Higgins’s interpretation was that it could extend to enable individuals to obtain relief for more than one property at any one time, however the Court rejected this on the basis the TCGA clearly provides against this.

This judgment will no doubt come as a huge relief for those selling and buying in the off-plan new build market. Whether or not there will be a further appeal by HMRC remains to be seen.