If all else fails, two thousand bottles of wine might clinch the deal.
For most people, claiming Private Residence Relief (PRR) on the sale of a main residence is straightforward. Broadly, PRR should apply if:
- You lived in the property as your main residence throughout ownership
- You did not let out any part of the property
- No part of the property was used exclusively for business
- The grounds, including all buildings, are less than about 1.25 acres
- You are UK resident for tax purposes
- The property was not purchased primarily to make a profit
The Chelsea Property Case
A recent Tribunal case tested these rules. Mr and Mrs Eyre purchased a house in Chelsea for just under £10 million, and sold it after refurbishment for £27.75 million.
Key points:
- The original house was demolished and a new one built in its place
- Features included a classic car stacker and a swimming pool with expensive marble
- The Eyres moved in 2013 and sold in 2015
- HMRC assessed £3.3 million, arguing the property was a venture in trade and not their main residence
Tribunal Decision
The Tribunal disagreed with HMRC. Reasons included:
- The house was purchased to live in, not to sell
- The Eyres’ residence was genuine:
- They were on the electoral roll there
- Their mail was redirected
- They paid council tax at the property
- Highly personalised refurbishment indicated long-term residence:
- Moving in 2,000 bottles of Château Montrose suggested they intended to enjoy the home, not sell immediately
Key takeways
- PRR claims can be challenged when properties are bought for high-value refurbishment or resale
- Genuine residence and lifestyle evidence matters
- Proper documentation (electoral roll, council tax, mail, personal touches) can support relief claims
We are always pleased to advise on PRR – whatever you happen to have in your cellar.
