The recent case of Ellis v HMRC was a bit odd. Mrs Ellis lived in a property in Horton and as she had another property which could also be described as a residence, she made an election under Section 222(5) TCGA 1992 for the Horton property to be her main residence for the purposes of the capital gains tax. Section 222 says:

"So far as it is necessary for the purposes of this Section to determine which of 2 or more residences is an individual's main residence for any period … the individual may conclude that question by notice to the Inspector given within 2 years from the beginning of that period …."

One of the conditions for such an election is that the elected property must be "a residence". You cannot make an election for any old property. It must be a place where a person is based, or where he continues to live, where he sleeps and shelters and has his home with a degree of continuity or permanence.

HMRC accepted that the Horton property was used as a residence by Mrs Ellis but claimed that the nature and extent of the use made by her of the property indicated that it was not her "main" residence.

This was strange because Section 222 allows the taxpayer to conclude that question by notice. That is what it says. It is only when no such election is made that one needs to consider the nature and extent of the residential use of the respective properties to determine which residence should be designated as the main residence.

The Tribunal observed that if HMRC was correct, an election under Section 222 would not conclude the question at all and that the HMRC submissions were contrary to the plain meaning and effect of the statutory provisions.

As far as I can see from the judgment, there was no tenable argument advanced by HMRC that the exemption should be denied. The stance taken by HMRC was completely hopeless and it is a mystery how the matter ever got to the Tribunal at all.