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Builder Wins Private Residence Relief Case Against HMRC

Always maintain accurate records ...


Posted by Helen Beaumont on 17/01/2024 @ 8:00AM

Disputes between taxpayers and HMRC are not uncommon. However, a recent case involving a taxpayer contesting a £1m tax bill for renovated properties in the UK has caught the attention of many ...

The builder won private residence relief because he kept detailed records!

The builder won private residence relief because he kept detailed records!

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The taxpayer in question is a property developer who has renovated and sold several properties in the UK. However, HMRC deemed these renovations as 'trading activities' and imposed a tax bill of £1m on them.

"In response, they appealed the decision, stating that the renovations were done for personal use and not for profit!"

This case highlights the importance of understanding the distinction between trading activities and personal activities in the eyes of HMRC. According to UK tax laws, trading activities are subject to income tax and national insurance contributions, while personal activities are not. This distinction can be blurry, especially in cases involving property development, and often leads to disputes between taxpayers and HMRC.

In this particular case, the developer argued that the renovations were done for personal use, as he had intended to live in the properties with his family. He also provided evidence of his personal belongings being moved into the properties. However, HMRC argued that the renovations were done with the intention of selling the properties for profit, making it a trading activity subject to tax.

The outcome of this case will depend on several factors, including the nature and extent of the renovations, the intention of the taxpayer, and the evidence presented by both parties. It also brings to light the importance of keeping detailed records and documentation when it comes to property development, to avoid any disputes with HMRC.

Another key aspect of this case is the role of tax advisers in helping taxpayers navigate through complex tax laws and regulations. In this case, he had sought advice from a tax adviser, who had advised him that the renovations would not be considered as trading activities. However, HMRC argued that the tax adviser had not fully understood the nature of the renovations and their intention.

This raises the question of the responsibility of tax advisers to ensure their clients comply with tax laws and regulations. It also highlights the need for taxpayers to carefully choose their tax advisers and ensure they have a thorough understanding of their business activities.

"The case of this particular developer also brings to light the importance of communication and transparency between taxpayers and HMRC!"

In this case, HMRC had initially accepted their tax return without raising any concerns. It was only during a routine tax investigation that the issue of the renovations came to light. This emphasises the need for taxpayers to be open and honest with HMRC about their activities, to avoid any potential disputes in the future.

Tax disputes can be complex and challenging, requiring a thorough understanding of tax laws and regulations. Contesting a £1m tax bill for renovated properties highlights the importance of being vigilant and transparent in tax matters.

As the saying goes, 'better safe than sorry,' so always seek professional advice and maintain accurate records to avoid any potential disputes with HMRC.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about private residence relief and dealing with disputes with HMRC, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.