Deduction for refurbishment costs reduced

In 2015-16 the taxpayer sold a residential property which he had owned since 2003. It had been his private residence but it was then rented out for many years. So in his tax return he declared a capital gain and claimed a deduction for refurbishment costs of £96 350.

HMRC opened an enquiry and formed the view that no more than £23 500 was allowable. This was based on the opinion of the district valuer on the value of the works. It increased the capital gains tax due and imposed a penalty on the basis the taxpayer had deliberately understated the gain.

The taxpayer appealed. In support he produced an undated invoice from the builder along with a letter dated 25 August 2003 from the builder confirming receipt of funds in Nigeria from the taxpayer’s father. The letter stated the works would be completed by 12 September 2003.

The First-tier Tribunal said...