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In May 2000 the taxpayer company acquired a property Red House in which the husband-and-wife directors lived and worked.
The business had previously owned other properties including warehouses and Lily Bank Farm where the directors had resided.
On the sale of the warehouses HMRC allowed rollover relief under TCGA 1992 s 152 on the capital gain. When the company bought the farm 75% of the purchase price was eligible for rollover relief.
After the purchase of Red House the firm paid for substantial improvements. The husband and wife paid £5 000 a year to the company in respect of their occupation. Council tax was paid but not business rates.
The company made a rollover relief claim in 2005 in respect of the gain on Lily Bank Farm. The Revenue enquired into the...
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