The McVitie's VAT case remains my all-time favourite tax case (“Is a Jaffa Cake a cake or a biscuit?” - what's not to love?) but occasionally one crops up in the private client world that cannot be ignored.
The Upper Tribunal's recent conclusion in HMRC v Gerald and Sarah Lee found in favour of the taxpayer and granted full Private Residence Relief (PRR) for capital gains tax (CGT) purposes on the disposal of their main residence – a property they had built after demolishing an existing house. PRR cases are not unusual – it’s a complex area – but what is interesting about this case is that it effectively challenged a widely-accepted interpretation of the legislation and determined that HMRC’s view was, in fact, wrong.
A reminder for us all that challenging the status quo may sometimes be worthwhile…
Tax experts say the landmark ruling, reinforced by an Upper Tribunal judge after HMRC appealed, proved that the taxman had been wrongly following the law for nearly 60 years.