Change of plan

Nature of a single property transaction

The taxpayer was married to a property developer. In April 2005 she bought a property. After renovating it she sold the house in May 2007. She said although she had originally planned to occupy the house the venture had been a trade. HMRC said she had held the property as a capital asset and capital gains tax was due on the proceeds. It also imposed penalties for failure to notify chargeability and submitting an incorrect return. The taxpayer appealed.

The First-tier Tribunal found as a fact that the taxpayer had had no intention of developing the property as an adventure in the nature of a trade. The judge referred to the badges of trade which she used as a ‘common-sense guidance’. Viewed as a whole although the taxpayer had bought the house with a view to living in it...