HMRC checks on private residence relief claims

When HMRC checks private residence relief, it asks whether the property was ever genuinely your home, which home was your main residence for each period, and whether you bought it mainly to sell at a profit. It looks for evidence of how you actually lived there, such as council tax, electoral roll, correspondence, furnishings and utility use, and claims usually fail because the occupation was temporary, was only intended, or overlapped with another home.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

How does HMRC come to check a relief nobody claims?

Private residence relief (PRR) is given by sections 222 to 226 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). HMRC’s guidance on selling your home says the relief applies automatically where the conditions are met, so there is no claim form. The check therefore comes through the reporting that does exist. A UK resident must report and pay any Capital Gains Tax due on UK residential property within 60 days of completion, and a non resident must report every UK property disposal even if no tax is due. A sale with partial relief will often appear on a 60 day property return and in the Self Assessment return.

Where a return was filed, HMRC can open an enquiry. Where no return was filed because full relief was assumed, HMRC uses a discovery assessment under section 29 of the Taxes Management Act 1970. The normal limit is four years after the end of the tax year (section 34), extended to six years for careless behaviour and 20 years for deliberate behaviour or failure to notify chargeability (section 36).

What must HMRC be satisfied about occupation?

The Capital Gains Manual at CG64427 says “residence” has its ordinary meaning: the place where a person habitually lives, their home. The test is one of quality rather than quantity, and there is no minimum period of occupation. CG64465 adds that the property must have been physically occupied as a residence at some point. HMRC’s view is that intending to live in a property is not enough, even where circumstances outside your control forced a sale before you moved in.

So the first questions are factual: when did you move in, who moved with you, and what changed when you did. Our page on how long you must live in a home for PRR looks at the length of stay in more detail.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

How does HMRC apply the quality of residence test?

HMRC relies heavily on Goodwin v Curtis (70 TC 478), summarised at CG64460. Mr Goodwin occupied a farmhouse for about 32 days, having instructed agents to sell it before his purchase completed. The courts held that this was temporary accommodation, not a residence. The factors are the degree of permanence, continuity and expectation of continuity. In the Court of Appeal, Schiemann LJ said a taxpayer must provide some evidence that the occupation showed some degree of permanence, some degree of continuity or some expectation of continuity.

In practice HMRC reads the timeline. A property put on the market, or a sale agreed, shortly after moving in suggests no expectation of continuity, whatever the length of the stay.

What evidence does HMRC ask for?

CG64545 gives officers a list of points to consider. It says it is not a checklist, but it closely matches HMRC’s information requests:

a timeline for each property from purchase to sale, including when it was first and last used as a residence;
where a spouse or civil partner and the family spent their time, and any homes owned by the spouse alone;
whether the size, location, number of rooms and furnishings suited the family as a main home;
where children went to school and where each partner worked;
registration with a doctor or dentist, and on the electoral roll;
the address used by banks, building societies, credit card providers, utilities, HMRC and other government departments;
where the car was registered and insured;
which property was the main residence for council tax, and whether any council tax exemption applied, such as for an uninhabitable property or a second home;
whether utility usage suggests real occupation.

CG64545 says HMRC is particularly interested in evidence of changes made to accommodate living at the property. Moving post, school places and GP registration are the kind of steps that support a claim.

What if there were two homes at the same time?

Section 222(5) TCGA 1992 lets an individual with two or more residences nominate which is the main residence, by notice to HMRC within two years from the beginning of the period concerned. CG64485 explains that only a property that is actually a residence can be nominated, but it need not be the one that is factually the main residence. CG64545 sets out the consequences of getting this wrong: if no valid notice was made, the main residence is decided on the facts, and an invalid notice cannot be replaced once the time limit has passed. Spouses or civil partners living together can have only one main residence between them.

A common enquiry finding is a second property, such as a flat near work, that was a residence but was never nominated, with the family home treated as the main residence on the facts.

When does HMRC argue the home was bought to make a gain?

Section 224(3) TCGA 1992 removes relief if the property was acquired wholly or partly to realise a gain from its disposal, and removes relief for the part of a gain attributable to later expenditure incurred for that purpose. CG65210 says HMRC applies it only where the primary purpose was an early disposal at a profit, not just a hope that the property would rise in value. CG65214 tells officers to consider first whether the transaction was a trade, and says it may be appropriate to argue both in the alternative. Serial buying, renovating and selling is where this arises; see PRR when buying to renovate and sell.

How might a claim fail?

Illustration only. Leah owns a family home. She buys a flat for £200,000, stays there for seven weeks while the family home is redecorated, and sells the flat 14 months after purchase for £240,000. She tells HMRC the flat was her residence and relies on relief for her period of occupation and the final nine months.

HMRC asks for council tax bills, which show a second home discount on the flat, and bank statements, which still go to the family home. Her children stayed at their school near the family home. On these facts HMRC is likely to say the flat was temporary accommodation and never a residence, so no part of the £40,000 gain is relieved. Even if it were a residence, without a nomination the family home would probably be the main residence on the facts. The final nine months under section 223(1) only help if the property was a main residence at some time; see the final period exemption.

How should you respond to HMRC’s questions?

Build a dated timeline before answering anything, and make sure every document fits it.
Produce primary records such as council tax, electoral roll, GP and school letters, insurance schedules and utility bills, not just a statement of intention.
Check whether a nomination was made and when, because the two year limit cannot be reopened.
Explain any early sale honestly. A change of job, relationship breakdown or ill health is very different from a sale planned before moving in.
Do not overstate the period of residence. Partial relief under section 223(2), based on the fraction of ownership during which the property was the main residence, is often the realistic outcome, and an inaccurate account risks penalties on top of the tax.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.