Separate building was part of residence for only or main residence relief

The taxpayer owned a substantial residence in Scotland. Adjacent to the house was a ‘bothy’ which was converted into a three-bedroom flat. This had a separate entrance but was connected by a first-floor balcony. The two properties were close enough so that somebody could see right into one of them from the other. The family which owned the main house kept some of their ‘stuff’ in the second property and had free access to it but for most of the time it was occupied informally by friends who made contributions to running expenses. The owner’s parents occasionally stayed at the property overnight.

HMRC assessed the disposal of the second property to capital gains tax. The taxpayer appealed on the basis that it formed part of his principal private residence.

The First-tier Tribunal considered the evidence. It said that following Lewis v Rook [1992] STC 171 it was...