Mark Campbell v The Commissioners for HMRC

10 Woodhouse Close, purchased on 17 December 2010 for £80,000 and sold on 24 April 2012 for £116,000;

28 Bramshill Close, purchased on 12 October 2012 for £95,000 and sold on 22 January 2015 for £125,000;

2 Bramshill Close, purchased on 8 February 2013 for £100,000 and sold on 17,18 or 20 June 2014 for £147,000; and

8 Wigshaw Lane, purchased on 12 or 17 June 2015 for £95,000 and sold on 31 March 2016 for £245,000.

the Appellant had not disposed of the Properties in the course of a trade and therefore he was not liable to income tax on the profits which he had made from the disposals;

as regards CGT:

each Discovery Assessment had been validly issued and the Appellant had not discharged the burden of proving that the quantum of tax assessed in either Discovery Assessment was incorrect;

the Closure Notice had been issued in the correct amount;

as regards the Penalties, the Appellant’s failure to notify his liability had been deliberate; and

the Penalties should be upheld.

the principal private residence exemption from CGT based on his residing in JRA was inapplicable (“Ground 1”);

the Discovery Assessments had been validly made (“Ground 2”);

the Appellant’s failure to notify his liability had been deliberate (“Ground 3”)

his parent’s home, where he had been residing while he owned the relevant Property, had been JRA (the “JRA Condition”). Satisfaction of the JRA Condition required that:

he intended in due course to occupy the relevant Property as his only or main residence (the “Intention Condition”).

the accommodation in which the Appellant had resided when he owned the relevant Property had been provided by reason of his employment;

it was necessary for the proper performance of the duties of the employment that the Appellant should reside in the accommodation; and

the Appellant had intended in due course to occupy the relevant Property as his only or main residence

see paragraphs [86] to [92] of the UT Decision.

the Respondents had discharged the burden of establishing that the Appellant’s failure to notify for the relevant tax years was deliberate; and

the Respondents’ decision in relation to the Penalties should be affirmed or substituted with another decision because the Respondents’ decision was flawed

see paragraphs [128] to [130] of the UT Decision.

matters relating to the availability of the principal private residence exemption from CGT based on the existence of JRA (“Issue One”); and

matters relating to the Penalties (“Issue Two”).

first, the legislation applicable to the issue in question;

secondly, the terms on which the issue in question has been remitted to us by the UT;

thirdly, the findings of primary fact (but not inferences drawn from those primary facts) made by the FTT in the FTT Decision in relation to the issue in question;

fourthly, the evidence provided to us at the remitted hearing in relation to the issue in question;

fifthly, our findings of primary fact (and the inferences which we have drawn from those findings of primary fact and the findings of primary fact made by the FTT in the FTT Decision) in relation to the issue in question, based on that evidence; and

finally, our conclusions in relation to the issue in question, in the light of the law as expressed by the UT in the UT Decision and on the basis of:

the Appellant’s father suffers from a serious medical condition for which he requires considerable care and assistance. At the original hearing before the FTT, the Appellant adduced evidence to that effect from a number of medical practitioners and from the Appellant’s mother – see paragraphs [88] to [92] of the FTT Decision. The medical evidence confirmed the diagnosis, prognosis and needs of the Appellant’s father and is summarised in paragraphs 43 and 44 below;

the Appellant had a contract of employment with his mother dated 5 April 2010 to provide care for his father – see paragraph [70] of the UT Decision. The terms of that contract are summarised in paragraph 45 below; and

at all times when he owned the Properties, the Appellant was residing in his parent’s home – see paragraphs [90] and [91] of the FTT Decision.

first, the FTT Decision contains no single identifiable section in which the FTT sets out its findings of primary fact. Instead, at various places in the decision, the FTT prefaces certain statements with the words “I find that…”;

secondly, in many of those cases, the finding which the FTT then goes on to express is simply to the effect that it has seen insufficient evidence of a particular assertion of fact made by the Appellant. This is particularly significant given:

It seems to us that, on that basis, where the FTT concluded in the FTT Decision that it had seen insufficient evidence of a particular assertion of fact made by the Appellant, we are entitled to, and indeed required to, consider whether any of the evidence which was provided to us in the course of the oral hearing before us gainsays that conclusion;

thirdly, some of the findings which the FTT goes on to express after the words ‘I find that…” are not findings of primary fact but instead inferences drawn by the FTT from its findings of primary fact or conclusions of law, neither of which falls within the scope of the UT’s instruction; and

finally, as the UT made clear in its analysis of the Intention Condition at paragraph [84] of its decision, the finding of primary fact at paragraph [109] of the FTT Decision – to the effect that the Appellant did not intend any of the Properties to be his main residence – was made in the context of the FTT’s determining the multi–factorial question of whether any of the Properties was the Appellant’s only or main residence for the purposes of Section 222(1) of the TCGA and not the question which we are here addressing of whether the Appellant satisfied the Intention Condition for the purposes of Section 222(8) of the TCGA. That, taken together with the two points set out in paragraphs 39(2)(a) and 39(2)(b) above, means that we consider that we are not bound to treat the finding of primary fact in paragraph [109] of the FTT Decision as binding on us in addressing this issue.

the Appellant was very active in the property market over a relatively short space of time but was not a professional property developer – see paragraphs [67] and [77];

as regards 10 Woodhouse Close:

– see paragraphs [68], [69], [110] and [117];

the Appellant purchased 28 Bramshill Close and 2 Bramshill Close within months of one another and within months of selling 10 Woodhouse Close – see paragraph [70];

2 Bramshill Close was purchased with the help of a mortgage although the evidence of that mortgage – the Appellant’s bank statements – did not shed any light on the length of the mortgage term – see paragraph [71];

28 Bramshill Close was modified before being sold relatively quickly after 2 Bramshill Close was sold – see paragraph [71];

the Appellant had provided no evidence of the actual expenditure required in order to make 8 Wigshaw Lane habitable – see paragraphs [72] and [73];

the Appellant’s parents would not have required the Appellant to leave their home if he had had nowhere else to reside – see paragraph [93];

by his own admission in his email to Officer Weir of 1 September 2017, the Appellant considered his residence in his parent’s property to be residing “at home” – see paragraph [94];

the Appellant did not intend any of the Properties to be his main residence – see paragraph [109]; and

the Appellant did not change his correspondence address to any of the Properties – see paragraphs [110], [117] and [127].

documentary evidence; and

witness evidence.

the medical evidence referred to in paragraph 38(1) above;

the contract of employment between the Appellant and his mother referred to in paragraph 38(2) above;

an email sent by the Appellant to Officer Weir on 1 September 2017 in response to Officer Weir’s initial letter to the Appellant of 29 August 2017;

a statement by the Appellant which was attached to an email sent by his agent, Hunter Healey (“HH”), to Officer Weir on 1 February 2018; and

photographs provided by the Appellant in relation to the Properties.

a letter dated 10 October 2012 from Dr Rhys Davies, a consultant neurologist at the Walton Centre NHS Foundation Trust;

a second letter from Dr Davies dated 6 February 2013;

a third letter from Dr Davies dated 23 October 2013;

a letter dated 2 May 2018 from Senior Nurse Practitioner Tracy Clarke of the North West Boroughs Healthcare NHS Foundation Trust who has been extensively involved with the Appellant’s father’s care from the start of his illness; and

a letter dated 9 May 2018 from Dr D A Royle of Birchwood Medical Centre.

the Appellant’s father first displayed symptoms of his illness, which is progressive, in 2007;

the nature of his illness was confirmed in 2010;

the Appellant has been employed as his father’s carer since April 2010 as his father refused care from anyone else. According to Nurse Clarke, due to the nature of his illness, “it [was] necessary for [the Appellant’s father] to receive full–time, around–the–clock care. The provision of temporary care and outside carers was initially considered, and [the Appellant’s father] secured a place at Hollins Park, however he did not respond well on arrival and became anxious at the thought of being away from his family. A decision was subsequently taken for the care services to be provided at the family home, and [the Appellant] was employed as [the Appellant’s father’s carer”;

in order to carry out the required care, it was necessary for the Appellant to live in his parent’s home while that care was provided. The Appellant could not properly perform his caring duties if he lived away from his parent’s home;

the Appellant’s mother also suffered from medical disabilities, could not always hear when her husband required assistance in the night and, when she could, was often physically unable to help;

in the months preceding his consultation with Dr Davies on 6 February 2013, the Appellant’s father had had a torrid time, suffering the death of his mother, a boiler fault at home, the death of his cat and an admission to hospital following a seizure; and

the symptoms had worsened between his visit to Dr Davies on 6 February 2013 and his visit to Dr Davies on 23 October 2013.

the Appellant was employed as a residential care giver and personal assistant – see part 1 clause 1;4;

the Appellant’s usual place of work would be the employer’s home address and employment accommodation would be provided free of charge to the Appellant at the employer’s home due to the high level of care needed for the patient – see part 2 clause 1;2;

the accommodation was being “provided for the better performance of the employees [sic] duties and is necessary in this type of employment when providing such high levels of care and flexibility for a patient needing 24–hour support and supervision.

Flexibility is a must due to the patients [sic] needs and for security reasons. It is impossible to say what time of the day or night you will be asked to work each week as it will depend on the health of the patient and the employer. Some weeks you may be asked to work several nights” – see part 2 clause 1;2;

the Appellant would be paid £9.15 for every hour he worked – see part 2 clause 2;1;

the number of hours of work required were not specified in the contract but the contract provided that these might vary from week to week. “There is a requirement for flexibility and these hours may be changed according to needs. In addition, you may be expected to work reasonable additional hours at the employers [sic] request…You may be required to work through the night, evenings and weekends” – see part 2 clause 3;1;

the Appellant’s post was funded subject to the employer’s assessed funded care needs at the time of the contract, which were subject to change by the employer – see part 2 clause 3;2;

the Appellant’s annual holiday entitlement was 5.6 weeks and, for that purpose, a week was described as “the equivalent of the number of hours/days usually worked per week” – see part 2 clause 6.1;

once the Appellant had been employed for a minimum of three months, if the Appellant’s father were to be admitted into hospital, the Appellant would be paid 100% of his standard contracted hours for a maximum of four weeks in any twelve–month period from 1 April to 31 March – see part 2 clause 11;2; and

the Appellant agreed that:

– see the working hours opt–out schedule.

in relation to 10 Woodhouse Close, photographs of the kitchen on 20 December 2010 and 20 March 2011, before and during the renovation of the Property, and photographs of a bedroom and the hall on 10 April 2011 and 2 May 2011, showing the renovated decor;

in relation to 28 Bramshill Close, undated photographs of the living room, bathroom and kitchen, showing the Appellant with his pets and furniture and red tiles in the kitchen; and

in relation to 8 Wigshaw Lane, undated photographs showing:

the Appellant;

the Appellant’s mother, Mrs Karen Campbell; and

Officer Weir.

General

between turning 18 on 19 February 2001 and the start of his employment contract on 5 April 2010, he had lived in his parent’s home at all times apart from:

it was fair to say that, throughout that period, he regarded his parent’s home as his default address. It was the place to which he returned when he wasn’t living elsewhere;

he had given up work as a mechanical engineer in around 2007 when his father became ill because his mother was disabled and unable to care for her husband herself. Thereafter, although he still went back and forth between his parent’s home and 278 Dragon Lane when his grandmother needed him to be with her – and was in fact staying with his grandmother at the time when he signed the employment contract – his parent’s home remained his default address throughout that period;

in 2010, when his father’s health had worsened and full–time care had become essential, consideration had been given to obtaining outside care for him. However, his father had reacted badly to this proposal and Nurse Clarke had asked him to consider becoming his father’s paid care–giver. It was this which led to the employment contract of 5 April 2010;

at the start of his employment contract, the local health authority in Warrington agreed to pay for 24 hours of care per week. This rose to 38 hours of care per week in the tax year 2012/13 and has more recently risen to 78 hours of care per week. The Appellant considered that any hours above the limit for which he was paid were voluntary;

10 Woodhouse Close

he was in a relationship at the time when he decided to buy 10 Woodhouse Close and move into it with his girlfriend in December 2010. The idea was that, because his hours of caring for his father fluctuated both because of his father’s needs from time to time and the amount of care which could be provided by his mother, he and his girlfriend would have a home to live in independently when he did not have to live in his parent’s home. The Property in question was chosen for its proximity to his parent’s home and was purchased with his own savings;

unfortunately, shortly after the Property had been purchased, frozen pipes caused the boiler and water tank to explode and brought down the kitchen ceiling. Due to the slowness of his insurers in dealing with the ensuing claim, the damage at the Property became worse. In addition, the repairs took longer than expected as a result of delays by his contractor. The result was that, by the time that the Property was in a habitable condition, his relationship with his girlfriend had ended;

at that point, he was not in the right state of mind to move into the Property because:

accordingly, in September 2011, he decided to sell the Property and completed that disposal in April 2012;

28 Bramshill Close and 2 Bramshill Close

he subsequently decided to purchase a new home to live in and identified 28 Bramshill Close for that purpose. This was in close walking distance of his parent’s home so that he could live there when his father’s condition permitted it and still provide support and help at short notice. In addition, the proximity of the Property to his parent’s home and the fact that the Property was a bungalow meant that it would be possible for his father to visit when well enough to do so;

unfortunately, in the week that he had purchased the Property, his father’s mother died and his father’s condition worsened as a result of the consequent emotional stress. Soon afterwards, at Christmas 2012, the boiler at his parent’s home broke down. That led to his father’s having a seizure and having to spend two nights in hospital;

nevertheless, he started to redecorate 28 Bramshill Close to his own taste, which he recognised did not necessarily conform to tastes in general. In addition, he chose bright red wall tiles for the kitchen to please his father who was a Liverpool fan. He also decided to replace and relocate the existing boiler and, because the Property would be uninhabitable while that work was done, he had decided to refit the kitchen and bathroom;

shortly after he had acquired 28 Bramshill Close, another house in the same close – 2 Bramshill Close – had become available for purchase. 2 Bramshill Close was a preferable place to live in comparison to 28 Bramshill Close given that it was detached, unlike the latter, and it offered more space. In addition, it was on a large corner plot with a bigger garden. He was a keen gardener and the Property had a large tree on it for his cats to climb;

since the asking price for 2 Bramshill Close was only £5,000 more than the asking price for 28 Bramshill Close had been, he decided to buy it as soon as it came on the market – which was only a month or so after he had completed the acquisition of 28 Bramshill Close – and offered the full asking price. He completed the purchase in February 2013. However, since he had used up all his savings in acquiring 28 Bramshill Close, he had to take out a mortgage to fund the purchase;

unlike 28 Bramshill Close, 2 Bramshill Close had no heating and that needed to be added. In addition, he had decided to redecorate 2 Bramshill Close to his own taste in the same way as 28 Bramshill Close, as described in paragraph 50(12) above;

even though he had decided to live in 2 Bramshill Close and dispose of 28 Bramshill Close, the latter Property proved difficult to sell despite his leaving it unoccupied at the suggestion of the estate agent (so that the new kitchen and bathroom remained unused) and despite reducing the asking price on a number of occasions. Since 28 Bramshill Close was not selling and he needed to clear the mortgage and get rid of his obligation to meet the overheads on at least one of the Properties, he had decided to put both Properties on the market at the same time to see which of them sold first;

as it transpired, 28 Bramshill Close proved the more difficult to sell and therefore he had moved into 28 Bramshill Close from March 2014, disposed of 2 Bramshill Close in June 2014, and taken 28 Bramshill Close off the market;

in September 2014, the Appellant and his neighbours were made aware of the fact that a paedophile who had recently been released from prison had moved into a nearby property in the close. This had caused a lot of tension and arguments in the close. Consequently, he had put 28 Bramshill Close back on the market and reduced the price again. He had continued to live at the Property until he disposed of it in January 2015;

8 Wigshaw Lane

despite his disappointing experiences in attempting to find a property to live in when he wasn’t living in his parent’s home, the Appellant had tried again. Once again, the criteria were that it needed to be a bungalow in close proximity to his parent’s home. To that end, he had purchased 8 Wigshaw Lane in June 2015. However, he had done so without having a survey done and he very much regretted that;

when he arrived to take possession of the Property, he found that there was no meter there and that the floorboards in both bedrooms and the living room, which had been covered by carpets when he viewed the Property, had now been exposed and had completely rotted away. He had also discovered a survey report at the Property, which he assumed to have been obtained by a previous owner, or someone interested in acquiring the Property, and this revealed that water from below had caused a significant amount of damage to the floorboards throughout the Property. This necessitated a significant amount of repair to the Property, including the removal of all the floorboards, the replacement of the drainage system and the replacement of the electrical wiring and pipework. This in turn meant that everything which was sitting on the floorboards (including the kitchen and bathroom) also needed to be replaced and that the patio and lawns had to be dug out;

a dispute arose with his next–door neighbour during the building work and, although the Appellant did eventually move into the Property for a brief time after the work was completed, the dispute soon escalated and led the Appellant to decide to sell the Property in December 2015;

the sale of 8 Wigshaw Lane had been completed in March 2016 and, following that disposal, the Appellant had acquired another bungalow at 109 Portico Lane in early 2017. He had been living there ever since then, in addition to living in his parent’s home. He had decorated 109 Portico Lane in the same way as 28 Bramshill Close, 2 Bramshill Close and 8 Wigshaw Lane; and

the Appellant’s brother also lived in the Appellant’s parent’s home although his circumstances were very different from those of the Appellant. He suffered from serious mental health issues and had a difficult relationship with both the Appellant and his father which meant that the Appellant’s mother had her hands full in looking after him as well as her husband.

she confirmed that:

however, the Appellant needed a home of his own to which he could escape when he was not needed to care for her husband and to which he could take her husband for a change of scene and to remain active when her husband’s health permitted it. Consequently, she had always encouraged the Appellant to have his own home and she would not have been keen for the Appellant to live in her home if he no longer needed to look after her husband. That was not to say that she would prevent the Appellant from staying in her home if the Appellant’s financial situation required it but, absent any such financial constraints, she would want him to have his own life in his own home;

the Appellant had suffered a serious car crash when he was 17 which left him with substantial and potentially life–threatening injuries. During that period, she and her husband had moved into intensive care for a brief period to be with him and to provide care. As a result of that, the relationship between the Appellant and her husband was particularly strong and there were many times when only the Appellant could get through to her husband; and

the Appellant’s brother could not live alone both because he did not have the financial means to do so and because of his mental health issues.

seeking to deny the obvious; or

overstating the role which his caring responsibilities had played in his failure to live in the Properties.

the findings of primary fact made by the FTT in the FTT Decision, as set out in paragraph 40 above;

the documentary and witness evidence described in paragraphs 41 to 52 above; and

our views on the reliability of the witnesses, as set out in paragraphs 53 to 62 above,

the Appellant had been provided with living accommodation in his parent’s home before he started caring for his father in 2007;

the FTT in the FTT Decision at paragraph [93] found as a primary fact that the Appellant’s parents would not have required the Appellant to leave their home if he had had nowhere else to reside and Mrs Campbell, in her oral evidence before us, testified to precisely the same effect; and

the Appellant’s parents were content to allow the Appellant’s brother to live in their home even though his brother was not providing care to his father.

the Appellant chose to purchase the Properties and claims that he intended to live in them;

the Properties were selected in large part for their proximity to the Appellant’s parent’s home so that the Appellant could attend to his father at short notice from them; or

the hours of care for which the Appellant was paid under the employment contract were a relatively small fraction of the hours in a week as a whole.

in the case of 10 Woodhouse Close, until the factors described in paragraph 50(8) above led the Appellant to decide that he no longer wished the Property to be his only or main residence;

in the case of 28 Bramshill Close, until 2 Bramshill Close was placed on the market and the Appellant became aware that it was available to purchase;

in the case of 2 Bramshill Close, until the date when the Appellant decided to place the Property on the market because he was unable to sell 28 Bramshill Close; and

in the case of 8 Wigshaw Lane, until the date when the Appellant decided to place the Property on the market because of his dispute with the next–door neighbour.

was simply engaging in property speculation; and

had no intention of living in any of the Properties but merely wished to profit from acquiring and disposing of them.

the Appellant testified that, when he acquired each Property, his intention was not to profit from acquiring and disposing of the relevant Property but, instead, in due course to occupy the relevant Property as his only or main residence and, notwithstanding the points made in paragraph 54 to 60 above, we considered the Appellant to be a generally honest and credible witness who provided a reasonable explanation for his decision to acquire, and then subsequently to dispose of, each Property;

Mrs Campbell also testified to that effect and we considered Mrs Campbell to be a reliable and compelling witness;

each of the Properties was very close to the Appellant’s parent’s home and it seems to us that the most plausible explanation for that proximity was the one given by the Appellant – to the effect that it was so that he could get to his parent’s home quickly and easily when he was living in the relevant Property and his father could visit when he was well enough to do so. If the Appellant’s purpose in acquiring any Property had been to make a profit from the acquisition and disposal of the relevant Property and not in due course to occupy the relevant Property as his only or main residence, there would have been no need for proximity to his parent’s home to have been a factor in choosing the Properties. Instead, the Appellant could have cast his net far and wide for those properties which offered the best opportunity for financial gain;

a similar point can be made in relation to the fact that, of the four Properties, three of them – all bar 10 Woodhouse Close – were bungalows, in the same way that 109 Portico Lane (where the Appellant currently resides when he is not caring for his father) is a bungalow. The Appellant explained that he wanted to live in a bungalow so that he could entertain his father there when his father’s health permitted it. If, in fact, the Appellant’s purpose in acquiring the Properties had been to make a profit from the acquisition and disposal of the Properties and not in due course to occupy the Properties as his only or main residence, there would have been no need for him to confine his acquisitions to bungalows;

it is plain from the evidence provided to us at the hearing that the Appellant had quite enough on his plate what with caring for his father, coping with the ill–health of his mother and dealing with the difficult circumstances surrounding his brother without voluntarily taking on the additional complexity of a time–consuming and costly sideline in property development. It seems to us to be much more likely that the acquisition of each Property was made with the intention in due course of living there and that the work which the Appellant carried out at each Property was required to meet that objective and not to increase the value of the relevant Property;

we accept the Appellant’s evidence that much of the work which was carried out to the Properties was both more expensive and more tailored to his own personal taste than it would have needed to be if a profit on disposal had been the Appellant’s purpose in acquiring the Properties. The red tiles used to reflect his father’s support of Liverpool are a case in point; and

after the disposal of 8 Wigshaw Lane, the Appellant acquired another property – 109 Portico Lane – and has lived there now for over seven years. We recognise that this level of stasis might be attributable to the Appellant’s being cautious about continuing to make regular acquisitions and disposals of properties given the nature of the dispute with the Respondents that has led to this appeal. However, we accept the Appellant’s evidence that the reason for it is simply that the Appellant had been seeking to find an appropriate property to occupy in due course as his only or main residence since he bought the first of the Properties but that, in the case of each of the Properties, supervening circumstances arose which meant that he decided to dispose of the relevant Property.

the Appellant’s intention in due course to occupy 10 Woodhouse Close as his only or main residence lasted from the date when the Property was acquired until September 2011, when the factors described in paragraph 50(8) above led the Appellant to decide that he no longer wished the Property to be his only or main residence – see paragraph 50(9) above;

the Appellant’s intention in due course to occupy 28 Bramshill Close as his only or main residence lasted from the date when the Property was acquired until the date when 2 Bramshill Close came on the market and the Appellant became aware that it was available to purchase – see paragraph 50(14) above.

The precise date on which 2 Bramshill Close came on the market is not entirely clear from the evidence provided to us. In his witness statement, the Appellant said that this was “shortly after” he had acquired 28 Bramshill Close (which was on 9 October 2012). In the statement by the Appellant which was sent by HH to Officer Weir on 1 February 2018, the Appellant said that this was “[within] a few weeks” of that acquisition. And, at the hearing, the Appellant said that it was “only a month or so” after that acquisition.

This is clearly not a perfect science but, given those statements and the fact that the Appellant did not complete his purchase of 2 Bramshill Close until February 2013, we think that it is reasonable to conclude that the date on which 2 Bramshill Close came on the market – and the Appellant’s intention in due course to occupy 28 Bramshill Close as his only or main residence ended – was approximately one month after the Appellant acquired 28 Bramshill Close on 9 October 2012 and, hence, around 9 November 2012;

the Appellant’s intention in due course to occupy 2 Bramshill Close as his only or main residence lasted from the date when the Property was acquired until the date when the Appellant decided to place the Property on the market because he was unable to sell 28 Bramshill Close – see paragraph 50(16) above; and

the Appellant’s intention in due course to occupy 8 Wigshaw Lane as his only or main residence lasted from the date when the Property was acquired until the date when the Appellant decided to place the Property on the market because of his dispute with the next–door neighbour – see paragraph 50(21) above.

we consider that that conclusion was not a finding of primary fact but rather a conclusion of law;

alternatively, even if it was not a conclusion of law but rather an inference of fact based on the primary facts found by the FTT, in remitting the case to us, the UT have instructed us to disregard inferences which were drawn by the FTT from the primary facts in the FTT Decision;

furthermore, in remitting the case to us, the UT have given the parties permission to adduce additional evidence so that it follows that we are entitled, and indeed obliged, to take that additional evidence into account in making our findings of fact, even if our findings of fact contradict a finding of primary fact in the FTT Decision; and

finally, in any event, the UT cannot have thought that the first two findings of fact which we have made were unsustainable in the light of the terms on which it has remitted the case to us because, had it considered that to be the case, that would have been determinative of the issue in relation to Section 222(8) of the TCGA and there would thus have been no need for the UT to have made that remission.

whether the accommodation provided to the Appellant by his parents was provided by reason of employment?

if so, whether it was necessary for the performance of the duties of his employment for him to live in that accommodation? and

whether, in relation to each Property, at any point during his ownership of the relevant Property, the Appellant intended in due course to occupy the Property as his only or main residence?

the care was provided from 2007, when the Appellant’s father first became ill, and therefore well before the employment contract was executed; and

even after the employment contract was executed, much of the care was provided voluntarily in that the contract made no provision for care in excess of the hours for which the Appellant was paid,

whilst it is clear that, in the period between 2007 and 5 April 2010, even though there was no employment contract, the Appellant was prepared to provide care and his parents were prepared to provide accommodation in return for that care, the period which we are considering is the period during which the Properties were owned and that period commenced after the employment contract was executed;

this means that, adopting the words of Oliver LJ:

there are two possible answers to the question posed in paragraph 101(2) above;

the first is that:

It follows that it was not the employment contract which enabled the Appellant to enjoy the benefit of the accommodation but instead simply the fact that the Appellant was providing care to his father;

the second is that:

It follows that, under the terms of the employment contract, the Appellant was obliged to provide care and the Appellant’s mother was obliged to provide the Appellant with accommodation and therefore the accommodation was provided by reason of the Appellant’s employment. Even if Ms Inglis’s interpretation of the employment contract is correct, and some of the care was provided by the Appellant voluntarily and outside the terms of the employment contract, the Appellant’s position in that regard was no different from that of a housemaster who is provided with accommodation under the terms of his employment contract but then carries out voluntary activities in addition to the activities which he is obliged to carry out under his employment contract; and

we favour the second of the above answers. It seems to us that, once the employment contract was executed, the Appellant became contractually bound to provide care to his father and his mother became contractually bound to provide the Appellant with the benefit of the accommodation. It follows that, on and after 5 April 2010, the accommodation which had hitherto been provided by the Appellant’s parents voluntarily was being provided by his mother by reason of his employment.

the numerator is the length of the period during which the Property was owned that the Appellant intended in due course to occupy the Property as his only or main residence and, in any event, the last 18 months (or, in the case of 10 Woodhouse Close, 36 months) of the period during which the Property was owned; and

the denominator is the length of the period during which the Property was owned.

the Appellant owned 10 Woodhouse Close for 16 months and the period which the Appellant was entitled by Section 223(2) of the TCGA to take into account as part of the period of exemption for that Property (no matter how long that intention continued) was 36 months;

the Appellant owned 2 Bramshill Close for 14 months and the period which the Appellant was entitled by Section 223(2) of the TCGA to take into account as part of the period of exemption for that Property (no matter how long that intention continued) was 18 months; and

the Appellant owned 8 Wigshaw Lane for 9 months and the period which the Appellant was entitled by Section 223(2) of the TCGA to take into account as part of the period of exemption for that Property (no matter how long that intention continued) was 18 months.

the Penalties were charged for a failure to notify a liability to tax in respect of the Properties under Section 7 of the TMA and we have concluded that no such liability arose; and

in any event, Schedule 41 requires a penalty for a failure to notify to be calculated by reference to the tax which is unpaid by reason of the failure and there is no such unpaid tax in this case.

the failure was “deliberate and concealed”, “deliberate but not concealed”, or neither deliberate nor concealed;

there has been disclosure by the taxpayer;

any such disclosure was prompted or unprompted and the quality of any such disclosure; and

the Respondents became aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure.

paragraph 6(2)(b) of Schedule 41 provides that the standard penalty for a failure to notify which is deliberate but not concealed is 70% of the potential lost revenue;

paragraph 6(2)(c) of Schedule 41 provides that the standard penalty for a failure to notify which is not deliberate is 30% of the potential lost revenue;

paragraph 7 of Schedule 41 provides that the potential lost revenue is so much of the amount of CGT in respect of the relevant tax year as is, by reason of the failure to notify, unpaid on the 31 January following that tax year;

paragraphs 12 and 13 of Schedule 41 set out a regime for a reduction in the penalty depending on the timing and quality of disclosure. They provide that:

paragraph 14(1) of Schedule 41 provides that the Respondents have a general discretion to reduce the penalty if they think it right because of “special circumstances”;

paragraph 16(3) of Schedule 41 provides that a penalty assessment is to be treated for procedural purposes in the same way as an assessment to tax;

paragraph 19(2) of Schedule 41 provides that, on an appeal against a penalty to the FTT, the FTT may either affirm the Respondents’ decision or substitute for the Respondents’ decision another decision which the Respondents had the power to make;

paragraph 19(3) of Schedule 41 provides that, where the FTT substitutes for the Respondents’ decision another decision which the Respondents had the power to make, it may rely on paragraph 14 of Schedule 41 to the same extent as the Respondents or, if it thinks that the Respondents’ decision was flawed, to a different extent; and

paragraph 20 of Schedule 41 provides that no liability to a penalty arises in the case of a failure which is not deliberate if the taxpayer satisfies the Respondents (or, on an appeal to the FTT, the FTT) that he or she has a reasonable excuse for the failure.

calculate the difference between the maximum and minimum penalty in that case;

allocate up to 30% of that difference to each of “Telling” and “Giving” and up to 40% of that difference to “Helping”; and

reduce the penalty by deducting the amount so calculated from the maximum penalty.

the correspondence which passed between the Appellant (and his agents) and Officer Weir in the course of the dispute;

the explanation provided by the Respondents for the calculation of the Penalties; and

the witness evidence of the Appellant and Officer Weir.

on 26 January 2018, after the receipt of the Schedule 36 notice dated 24 January 2018, the Appellant sent an email to Officer Weir in which he said that, following Officer Weir’s email of 19 December 2017, he had contacted HH and told them to send Officer Weir the information and documents requested and that he had now contacted HH again to chase things up;

on 1 February 2018, the Appellant wrote to Officer Weir once again, this time attaching an email exchange between the Appellant and HH in which:

The Appellant assured Officer Weir that he had been trying to resolve the dispute as soon as possible. To that end, he had retained HH and given HH the relevant information and documents months ago. Finally, he said that HH would be in touch with Officer Weir over the next two days;

also on 1 February 2018, HH responded to Officer Weir’s letter of 19 December 2017, enclosing the statement by the Appellant to which we have referred in paragraph 47 above, disagreeing with certain parts of Officer Weir’s analysis and suggesting as a compromise that the Appellant be liable to CGT instead of income tax on the gain made on each of the Properties apart from 28 Bramshill Close;

on 6 February 2018, wrote to the Appellant to explain why he had issued the Schedule 36 notice and to ask the Appellant for evidence to support both the computation of the gains and the view that neither income tax nor CGT was payable on them;

on 12 February 2018, Officer Weir responded to the points made in HH’s letter of 1 February 2018 and reiterated his request for information and documents;

on 22 February 2018, HH wrote to Officer Weir, responding to the points which Officer Weir had made and enclosing a considerable amount of information and documents, including the Appellant’s bank statements, but no invoices or receipts in respect of the expenditure which the Appellant had claimed to have incurred;

on 28 March 2018, Officer Weir wrote to HH to say that, in the absence of any invoices or receipts, there was nothing for him to review. It was not possible for him to identify costs from the bank statements which had been sent to him because the costs were not referred to in those statements. Officer Weir informed HH that he was disappointed by the lack of information provided to support the Appellant’s claim to have incurred the costs and that he wished to move the dispute forward and would be issuing assessments and penalties shortly after 27 April 2018;

on 20 April 2018, Brabners wrote to Officer Weir to say that they had recently been instructed by the Appellant in place of HH and to ask for some additional time to review the correspondence before responding to Officer Weir’s most recent letter;

on 10 May 2018, Brabners wrote to Officer Weir to respond to the points made by Officer Weir in his most recent letter and to reiterate that the Appellant had not retained any invoices or receipts in relation to the costs incurred and that, in making his calculations, the Appellant had largely used estimated numbers from memory;

on 30 May 2018, Officer Weir responded to Brabners’ letter of 10 May 2018. He apologised for the delay in his response, set out his views on the points made by Brabners and said that he could not allow costs for which no evidence had been produced;

on 29 June 2018, Brabners emailed Officer Weir to respond to various points which Officer Weir had made in his most recent letter and to reiterate that the Appellant had nothing more to provide to evidence his costs; and

on 13 July 2018, Officer Weir wrote to the Appellant to set out his final views on the matter and to explain that the Closure Notice, the Discovery Assessments and the Penalties would shortly be issued.

the failure to notify was not deliberate;

the failure to notify was prompted;

the penalty range was 10% to 30% in respect of the tax year 2015/16 and 20% to 30% in respect of the tax years 2012/13 and 2014/15;

the discount to be applied for the quality of disclosure was 70% of the difference between the maximum and minimum in each case, which is to say 14% in the case of the tax year 2015/16 and 7% in the case of the tax years 2012/13 and 2014/15; and

the reason for that figure of 70% was as follows:

“Telling 20/30

At the start of my enquiry you did not volunteer any information about the other properties you had bought and sold. You only referred to the last disposal and did not tell me about the other three. The reduction for disclosure is 20% (out of 30%).

Helping 25/40

You have not accepted that a tax liability arises. you still claim that you intended to live in the properties, even although the facts point to you acquiring the properties for the purpose of realising a gain. Your computations of the gains include deductions for expenditure that you could not have incurred. I asked you to explain where these figures came from or where you acquired the money to pay those expenses, but you have chosen not to respond. You claimed that you did not keep any documents, but have not attempted to obtain copies. The reduction for helping is 25% (out of 40%).

Giving 25/30

There were delays at the start of this check, but I put that down to the busy tax return period that affected your advisor, and I shall not attribute those delays to you. All in all you have given me access to all of the documents you say that you have, albeit you could have done more to verify the expenditure and obtain copies of the loan agreement. I shall allow a reduction of 25%.”

he had not re–visited the determination of the discount for disclosure after:

he had awarded the Appellant only a 20% discount for “Telling” because the Appellant in his initial response of 1 September 2017 had not disclosed that he had previously owned the three Properties other than 8 Wigshaw Lane and did not do so until after he had been alerted by the terms of Officer Weir’s email of later that day that the Respondents were aware of them. Officer Weir confirmed that the Respondents had known of the Appellant’s ownership of the other Properties when he sent his letter of 29 August 2017 and he had followed the Respondents’ practice of allowing the taxpayer to initiate disclosure; and

he had awarded the Appellant only a 25% discount for each of “Helping” and “Giving” because the Appellant had provided the Respondents with hardly any of the information requested. He said that the Appellant could have made more effort to provide the information – for example, by obtaining copies of the missing invoices and receipts – although he accepted that he had not specifically asked the Appellant to do that.

the Appellant did not disclose to Officer Weir that he had acquired and disposed of the three Properties other than 8 Wigshaw Lane in addition to 8 Wigshaw Lane after receiving Officer Weir’s letter of 29 August 2017 in relation to the latter Property. It was not until Officer Weir informed the Appellant on 1 September 2018 that he was aware that the Appellant had made profits or gains on other properties and reminded the Appellant of that fact on 17 October 2017 that the Appellant disclosed that that was the case;

the Appellant did not keep appropriate records of the costs which he had incurred in relation to the Properties, with the result that he was unable to provide Officer Weir with the information required to support his claims for most of those costs; and

subject to the above, the Appellant did all he could to help Officer Weir with the enquiries which Officer Weir was making. He instructed HH promptly as soon as he became aware of Officer Weir’s enquiry. Whilst we think that this cannot have been immediately after he received Officer Weir’s initial letter of 29 August 2017 on the morning of 1 September 2017 – given the terms of the Appellant’s response at 14:55 on that day and the fact that Officer Weir did not send his email on that day until 17:00 – we find that the Appellant instructed HH very soon after he received Officer Weir’s email. After that, the Appellant did all he could to ensure that HH responded promptly to Officer Weir’s communications and provided whatever information they could, eventually replacing HH with Brabners. In consequence, the entire length of the enquiry from the date of Officer Weir’s initial letter through to the issue of the Closure Notice, the Discovery Assessments and the Penalties took a little over 10 months, and that included a delay of over a month in February and March 2018 and a delay of twenty days in May 2018 in Officer Weir’s responding to the Appellant’s agent.

the Appellant had a reasonable excuse for his failure to notify and therefore the Penalties should not have been assessed at all;

the discount given by the Respondents in calculating the Penalties was insufficient and the Penalties should be reduced; and

there were special circumstances in this case which meant that the Penalties should be reduced.

the complexity of the law in this area;

the Appellant’s intentions as regards each Property; and

the emotional pressure on the Appellant by virtue of his caring responsibilities and his father’s illness

paragraph 13(1) of Schedule 41 provided that, where the person who would otherwise be liable to a standard penalty had made a disclosure, the Respondents were obliged to reduce the standard percentage to one that reflected the quality of the disclosure; and

paragraphs 13(2) and 13(3) of Schedule 41 then provided that the standard percentage could not be reduced to a percentage below the minimum percentage.

one of the reasons given by the Respondents for reducing the “Helping” element of the discount for disclosure was that the Appellant had not accepted that tax liabilities arose and continued to maintain that he intended to live in the Properties. That was not an appropriate matter to be taken into account when determining the quantum of a penalty; and

by his own admission, Officer Weir had not revisited the discount for disclosure after:

That was not appropriate.

to cancel the penalty if the failure was not deliberate and it considered that the taxpayer had a reasonable excuse for the failure; or

to substitute for the Respondents’ decision another decision that the Respondents had the power to make if it considered that the Respondents had imposed too high a penalty for one of the reasons articulated in paragraphs 134 to 142 above.

the convergence of long–term serious personal hardship, the legal and practical restrictions on where the Appellant could live and the Appellant’s continuous caregiving responsibilities;

the Appellant’s repeated good faith attempts to establish a primary residence, each of which was thwarted for unforeseen reasons; and

the extent of his compliance with the Respondents’ investigation, as mentioned in paragraph 141 above.

we would start by observing that each of the three areas on which Mr Gordon seeks to rely has a specific ambit.

The reasonable excuse defence is exclusively focused on the period prior to the commencement of the dispute. In this case, it requires us to identify the reasons why the Appellant failed to notify the Respondents of his tax liability and to consider whether, viewed objectively, those reasons amount to an objectively reasonable excuse for the failure, taking into account the experience and other relevant attributes of the Appellant (see Perrin). The Appellant’s conduct during the course of the dispute is irrelevant.

In contrast, when we are considering the discount for disclosure, it is the Appellant’s behaviour during the course of the dispute which we need to consider and the reasons why the Appellant failed to notify the Respondents of his liability are irrelevant.

The special circumstances defence is something of a hybrid of the first two in that it is all–embracing and therefore capable of being satisfied by reference both to events preceding the dispute and events in the course of the dispute. In this case, it requires us to consider whether the Respondents’ decision to the effect that the circumstances in this case were not sufficiently special to justify a reduction in the Penalties for special circumstances was flawed;

turning then to the reasonable excuse defence, on the assumption which we are necessarily making for the purpose of addressing the issue of Penalties that the Appellant was liable to CGT in respect of the gains in question, we do not agree that the Appellant’s failure to notify the Respondents of the liabilities was objectively reasonable on the basis described in Perrin. It would seem from the Appellant’s initial response to Officer Weir of 1 September 2017 that the Appellant was at that stage unaware that he might be able to claim the benefit of the principal private residence exemption based on the existence of JRA and was under the impression that the exemption was available for a property as long as he intended to live in it and the relevant property was the only property that he owned.

Believing that he had had no liability to notify the Respondents of his gains on any of the Properties on that basis was not an objectively reasonable conclusion to have reached given that:

Those facts, coupled with the number of properties that he had owned and the significant quantum of the gains that he had made on them should have led the Appellant to take professional advice (or to ask the Respondents) before concluding that the principal private residence exemption was available for each Property.

We do not consider that the pressure under which the Appellant was operating as a result of his caring responsibilities and his family circumstances in general affects that conclusion. The Appellant has shown by his actions that, notwithstanding those responsibilities and circumstances, he was perfectly capable of carrying out renovations to the Properties and consulting professional advisers when required. He should have taken the appropriate professional advice at the time;

as for the level of the discount for disclosure, we do not agree with Mr Gordon that the Appellant’s disclosure in relation to the first three Properties which he owned was “unprompted”. Under paragraph 12(3) of Schedule 41, a disclosure of an act or failure made by a person when that person has reason to believe that the Respondents either have discovered, or are about to discover, the relevant act or failure is “prompted”. In this case, it is plain from the correspondence which passed between the Appellant and Officer Weir that the Appellant did not disclose his ownership of those three Properties until after he received Officer Weir’s email of 1 September 2017. In that email, Officer Weir revealed to the Appellant that the Respondents were aware that the Appellant had made gains on other properties. In saying that, Officer Weir gave the Appellant reason to believe that the Respondents had discovered his failure to notify his liability to tax in respect of those three Properties. Accordingly, his subsequent disclosure of that failure was “prompted”. That means that the range of possible penalties for the failure to notify his liability to tax on the gain made on each of those Properties was 20% to 30%, which is the approach which the Respondents have taken in determining the Penalties in the SOC;

in considering whether the discount that the Respondents then gave for the Appellant’s disclosure during the dispute was correct, we do not agree with Mr Gordon’s submission in paragraphs 136 to 140 above. If that submission were to be correct, then its effect would be that a taxpayer would be able to benefit from the maximum available discount in each case even where the taxpayer has scored considerably less than 100% on “Telling”, “Helping” and “Giving”. It seems to us that that, in and of itself, is an indication that the basis described by Mr Gordon is incorrect. The position should be that a taxpayer who scores 100% on “Telling”, “Helping” and “Giving” should be subject to the minimum penalty and that a taxpayer who scores something less than 100% on those three measures should be subject to a penalty that exceeds the minimum by an amount that reflects the shortfall in disclosure.

Approaching the language in the legislation more technically, there is nothing in the language of paragraph 13(1) of Schedule 41 that requires the Respondents to apply the discount calculated in accordance with their three measures to the standard penalty. The paragraph merely specifies that the standard penalty is to be reduced to one that reflects the quality of the disclosure. In the circumstances, the Respondents are perfectly entitled to calculate the penalty by applying the discount percentage they calculate to the difference between the standard percentage and the minimum percentage. Indeed, we would say that they would be wrong to do otherwise given the illogical outcome to which we have referred in the paragraph immediately above;

as for the scores which the Respondents gave to the Appellant for “Telling”, “Helping” and “Giving”, we agree with almost all of them. Specifically:

having said that, we agree with Mr Gordon that it was not appropriate to reduce the discount for “Helping” simply because the Appellant, through his representatives, continued to maintain that he was entitled to the principal private residence exemption. Disagreeing over the existence of the liability is not a lack of co–operation in making disclosure. Taking that into account, were the Penalties issue to be a live issue, we would be inclined to give the Appellant a 30% discount (instead of a 25% discount) for “Helping”, taking the overall discount percentage to 75% from 70%; and

finally, we do not see anything in the circumstances of this case which is sufficiently “special” to mean that the Respondents’ decision not to apply a reduction in the Penalties for that reason was flawed. The mere fact that the Appellant had difficult personal circumstances does not mean that he was entitled to ignore his responsibilities in relation to tax.