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Business taper and private homes

Hats off to Rachel Short and David Earle!

Sorry? Who?

These were the Judge and Member respectively in the recent First-Tier Tax Tribunal case of Jefferies. The case concerned the interaction of Business Asset Taper Relief and Private Residence Relief where an asset is used both in a business and as a home – in this case, a hotel in which the proprietors resided. The well-known and established HMRC practice has been that if there is, say, 35% business use, BATR applies only to the 35% of the gain remaining chargeable after the application of PPR, even though intuition and common sense (not always bed-fellows of tax law) would say that that gain is essentially “wholly business” and ought to benefit from BATR in full.

Intuition and common sense plainly commended themselves to Ms Short and Mr Earle, for they found in favour of the taxpayer. Hurrah!

Unfortunately, fair and just though their decision undoubtedly was, it was equally undoubtedly wrong (at least in our view) as a matter of law and must inevitably be reversed should HMRC appeal to the High Court. Nonetheless, anyone who has filed a 2007/8 return on the basis of HMRC's discredited view of the law is in time (just) to amend the return before 31 January 2010 to accord with the Tribunal decision and thus to benefit should the decision stand good.

For more on this and for advice on CGT generally please contact us.