Home is where the monogrammed cigar humidor is!

Our 2021 Tax Bite, ‘No PPR relief for traders!’ was a cautionary tale for developers moving into a property, refurbishing and selling on, with the expectation of enjoying a tax-free sale with Principal Private Residence (PPR) relief, only to find themselves subject to income tax resulting from their venture into trading activities. As most readers will be aware, PPR relief generally allows relief from capital gains tax on the sale of a property which is a person’s main or only home.

In the recent case of Raymond and Diana Eyre v HMRC [2025], the First Tier Tribunal (‘FTT’), highlighted two key issues, for which the evidence was crucial:

1. The importance of intention at the point of purchasing a property, in determining whether there is a trading activity.
2. The nature of actual use and occupation needed to secure Principal Private Residence (‘PPR’) relief.

The key facts were as follows:

• In 2010, whilst living in Holland Park, Mr and Mrs Eyre bought a property in Chelsea for just under £10m. They demolished the property, rebuilding a new house on the plot. They moved in during July 2013, immediately nominating it as their main residence for PPR. They rented out their Holland Park home in the meantime.
• In February 2015, they sold the Chelsea house for £27m and then moved back into the Holland Park property, claiming PPR relief on the substantial gain.
• HMRC challenged the claim on the basis that the Eyres had intended to ‘make a profit on the turn’ in accordance with the ‘badges of trade’ (discussed in previous tax cases). This had therefore been a ‘venture in the nature of trade’ which was subject to income tax as a result. They also argued that in the event it was deemed to be a capital disposal, the lack of genuine occupation meant PPR relief was not available, citing factors such as the Eyres leaving their furniture behind at the Holland Park property. 
• The FTT found for the taxpayers, accepting they had intended to occupy the Chelsea property as their family home when they purchased the plot, with sufficient evidence of actual use and occupation as a PPR.

Why did the FTT side with the taxpayers?

The trade motive and the ‘badges of trade’

The Eyres’ original intention on buying the property was key. Loan documentation relating to the financing of the development indicated proceeds from a sale of Holland Park would fund capital repayments.

The time and effort involved in consulting architects and designers in personalising the renovations and for the family throughout the house went well beyond those expected to be carried out for a prospective purchaser. Each child had selected the decor for their own suite of rooms, the electric vehicle charger would only work with Mr Eyres’ specific model of BMW and the cigar humidor was personalised with his initials, amongst other detail.

The fact the Eyres later had a sales brochure drawn up did not, on its own, suggest a trading motive. The FTT accepted that their intention to live in the house had been genuine from the outset.

The PPR argument

The Tribunal also found strong evidence of actual occupation. The Eyres physically moved in once the property was ready, lived there for over a year, holding parties and filling the house with bespoke and personal items, including moving their extensive wine collection from Holland Park!

Utility and council tax records, electoral roll and post redirection, along with the interior design choices supported their claim that this was their family home, rather than a development project that they were simply ‘occupying’. That they still owned Holland Park and moved back there after the sale was not pertinent to the fact that the Chelsea house had clearly become their main residence.

WSM’s view

The details of this case are useful reading for those with a ‘doer-upper’, in understanding that how their intentions and actions are evidenced from the outset could effectively mean the difference between an eventual tax-free sale and 45% income tax.

Whilst the case demonstrates HMRC’s willingness to challenge projects, a relatively short time between development and accepting ‘an offer you can’t refuse’ is not necessarily fatal. This is providing you can demonstrate that the plan from the outset had been to acquire a home and to then genuinely occupy it as such.