Lawson v HMRCC [2011] UKFTT 346 (TC)

Analysis

The appellant appealed from an amendment to self assessment for the year ended April 2006. Between February 2002 and August 2005 the appellant had been the sole legal owner of a property. The appellant had calculated her capital gains tax liability on the basis that she and her husband were each entitled to claim annual capital gains tax exemption because they were joint beneficial owners. HMRC opened an enquiry and determined that the appellant was the sole beneficial owner. A review affirmed the determination on the basis that:

1. (a) sole legal title was vested in the appellant;
2. (b) rental income was paid into the appellant’s account;
3. (c) the full amount of income and expenditure on the property was included in the appellant’s tax return;
4. (d) proceeds from the sale of the property were paid into the appellant’s bank account;
5. (e) the appellant’s husband had omitted to include his share of the capital gain in his tax return; and
6. (f) evidence from the appellant’s husband of payments made to the appellant were insufficient to prove that these were made to satisfy the mortgage on the property.

Evidence given for the appellant was that the property was bought as a residence for her daughter, using inheritance belonging to the appellant combined with the proceeds of an endowment policy belonging to the appellant’s husband. The family home and the appellant’s husband’s business premises were vested in the appellant’s husband’s sole name. Having been married for over 20 years, the appellant and her husband considered each property to be beneficially owned by them in equal shares.

Held (allowing the appeal)

1. (1) Although no criticism could be made of the view taken by HMRC that all indicators pointed to the appellant having sole legal and beneficial ownership, the clear and unequivocal evidence was that the property was purchased as a home for the appellant’s daughter rather than for investment purposes. There was a lack of commerciality. It was in effect a second family home, occupied by the appellant’s daughter, and no ‘rent’ as such was received. The property was funded with money from both the appellant and her husband (paras [23]-[27]).
2. (2) On the evidence, the appellant and her husband were both beneficial owners of the property (paras [28]-[29]).

JUDGMENT BLEWITT J: [1] By Notice of Appeal dated 14 September 2009 the appellant appealed against a closure notice and amendment to self assessment for the year ended 5 April 2006 in the amount of £5,781.44, including capital gains tax liability in the sum of £5,777.60. Background facts [2] The appellant was not originally within …

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