House used commercially

The taxpayer was a restaurateur. He bought a house near his premises in September 1995 but did not live in it himself using it to house his employees.

The workers paid no rent. The taxpayer accounted for the situation through his business’s payroll as a benefit in kind of free work-related accommodation by way of PAYE settlement agreements.

He sold the property in October 2006 having bought a new house more conveniently situated for his employees two years previously. The taxpayer and HMRC agreed the gain on the disposal at £486 546 but disagreed about the amount of taper relief available.

The taxpayer claimed business asset taper relief on the grounds the house had been used wholly or partly for the purposes of the trade carried on by the taxpayer.

The Revenue said the provision of employee accommodation was not a core trading activity meaning...