Quality of occupation for only or main residence exemption

The taxpayers a married couple bought a property in March 2013. At the time they were living in rented accommodation elsewhere in the same town. Before moving in to the new house they decided to carry out some refurbishment on it.

In June 2014 the couple sold the property to an individual who was living locally who had made several offers to buy it since March but which the taxpayers had initially rejected. They had previously signed an extension to their lease of rented house which was convenient because it was next door to a building project on which the husband’s business was working.

Neither taxpayer included the disposal of the house on their tax returns on the basis it had been their only or main residence and was therefore exempt from capital gains tax.

HMRC said the taxpayers’ occupation of the property which had been...