This delay could be up to two years in circumstances outside the individual’s control. An extra-statutory concession is, in effect, a relaxation by HMRC in the interpretation of tax legislation that results in a reduction in the tax payable by a taxpayer compared to a strict interpretation of tax law.
Mr and Mrs Lee argued that HMRC should only have considered the period of ownership of the new house, which was sold, when considering the main residence relief from CGT in the legislation.
The logic here is that the period of ownership is not explicitly defined in the main residence relief legislation. According to the Lees' tax advisers, this means the legislation should be interpreted in the ordinary meaning of the words: the old house was not what was sold but rather the new house.
HMRC contended that the property as a whole (the land and any house built on it) should be considered for the purpose of the main residence relief. On this basis, it did not matter that the new house was occupied throughout the period after it was completed, apart from the first four days.
The crux from HMRC’s point of view is that there was a period from the initial acquisition of the property when there was no occupation due to demolition and building of the new house.
HMRC further held that the extra-statutory concession had since been made law by parliament. This must mean that their interpretation of the meaning of the ownership period for the purpose of main residence relief must be correct.
What the tribunal decided
The tribunal did not agree with HMRC’s contention that for the purpose of considering the period of ownership of the house, the legislation should be read as including the land on which the house was built.
This decision was based on the fact that the legislation was specific about referring only to the dwelling house. If parliament had intended to include the land as well, it would simply have written the legislation accordingly.
The tribunal agreed with the argument put forward by Mr and Mrs Lee that the natural meaning of period of ownership must therefore only refer to the house itself, separate from the land on which it was built.
The tribunal did not think that parliament necessarily considered a scenario such as the one in this case, when the main residence relief legislation was originally drafted. The tribunal did agree that the purpose of main residence relief was to allow the full amount received on sale on an individual’s home to be available to buy a replacement home, without the need to lose part of the sale proceeds by having to pay CGT.
