Sales of building plots were trading transactions

The taxpayer bought Bunny Hall estate in 2001. At the time the hall was unoccupied and dilapidated. She financed the purchase by borrowing from her husband a property developer under an undocumented unsecured interest-free loan.

To enable the renovation of the property the taxpayer sold six building plots within the grounds. She sold five of these to her husband and the other to a third party.

In her tax returns the taxpayer claimed only or main residence relief on the disposals of the plots. After an enquiry HMRC issued closure notices saying the disposals were either trading transactions liable to income tax and National Insurance or capital transactions liable to capital gains tax and not eligible for only or main residence relief.

The taxpayer appealed.

The First-tier Tribunal was not impressed with the taxpayer as a witness nor the fact that her husband was...