Mark McLaughlin warns that claims for capital gains tax relief on the sale of a dwelling-house may be open to challenge by HM Revenue and Customs in some cases.
Most individuals who dispose of their dwelling-house assume that any profit on disposal will automatically be tax-free due to capital gains tax (CGT) principal private residence (PPR) relief.
Not so fast…
However, HM Revenue and Customs (HMRC) sometimes challenges the availability of PPR relief in whole or in part. There are several possible lines of attack.
For example, if a dwelling-house was bought, redeveloped, and sold within a relatively short timeframe, HMRC might consider that the transaction was trading in nature. This could result in any profit being liable to income tax (NB income tax ‘trumps’ a CGT charge), so no PPR relief
