Background
The appellants lived at a property (D), part of which was divided into five building plots prior to its disposal. Plots 1 and 5 were sold in March 2006. Plot 3 was gifted to the appellants’ son in June 2006. The appellants built a new home on Plot 4, into which they moved in January 2007. D was sold in February 2007.
Plot 2 was sold in December 2009. Private residence relief was claimed on its disposal for capital gains tax purposes, on the basis that Plot 2 formed part of the garden or grounds of Plot 4, on which the appellants’ new principal private residence had been built (the area of land was within the ‘permitted area’ in TCGA 1992, s 222(1)(b)).
Following an enquiry into the appellants’ tax returns for 2009/10, HM Revenue and Customs (HMRC) issued closure notices concluding that private residence relief did not apply to the disposal of Plot 2.
