Raymond Charles Eyre and Diana Eyre bought 37 Burnsall Street in Chelsea in 2010, demolishing the whole property and building a new house on the same site. They then sold the six-bedroom property fitted with six bathrooms, a swimming pool and sauna, gym, wine cellar, media room, and two kitchens with utility rooms, for £27.15m.

The couple submitted tax returns stating their main residence was the Burnsall Street property, however they owned another house in Holland Park at all relevant times of the discovery assessment which HMRC considered their principal private residence (PPR).

HMRC argued the development of the property was ‘in the nature of trade’ and so should have been subject to capital gains tax (CGT) after the sale in 2014, issuing Raymond with an assessment for £1,761,446 and Diana with an assessment for £1,566,853, adding up to £3.32m in total.

Just £17,702 was paid by the Eyres in CGT on their tax returns for the year in question, split equally between the two.

The Eyres appealed both of these assessments, eventually taking it to the First Tier Tribunal in 2023. However, this was postponed from March 2023 until the conclusion of Lee v HMRC [2022], which also revolved around the construction of a new property and PPR.

The Holland Park property was renovated in 2010, with the couple spending over £500,000 on this with the intention to sell on the property for between £35m to £40m after it was completed in March 2010. A a potential buyer was found but the Eyres stated it was too early for a sale of the property, even after receiving an offer of £42m.

In April 2010 the couple viewed the Burnsall Road property, the centre of this case, when it was advertised for £12.6m, though it had been on the market for over one year and so the Eyres believed a deal could be struck.

The Eyres were not both convinced about buying the property, Diana considered the building ‘hideous’ but was persuaded to make an offer after Raymond said she could have ‘free hand in its restoration and refurbishment’.

An offer of £9.75m was made and accepted, with contracts exchanged in June 2010.

Shortly after this architects and property developers were consulted, landing the pair with Finchatton, a high-end real estate development company. A deal was made for Finchatton to contribute £1m to the project for a 15% share of the value of the property once sold ‘to be paid by the Eyres’.

The Eyres originally intended 37 Burnsall Street to be constructed into properties for their three children, and themselves, and so the whole family was involved in designing the building for their own personal needs.

However, it was not until 2013, after the council signed off the building work, that the family moved into the house.

Saffery, the Eyres’ accountants, then contacted Raymond to change their PPR to the Burnsall Street address, asking them to sign the document so HMRC could be updated.

By the end of July 2013 HMRC had acknowledged receipt of the notification. Both were also registered to vote from this address and 2,000 bottles of Château Montrose Bordeaux wine were transferred from the Holland Park address to the wine cellar in Burnsall Street.

By 2014 the Eyres had decided to sell the property, using ‘well networked estate agents’ to market the property to their list of high net worth clients. They received an offer of £25m, but refused, saying their bottom line was £27,750,000.

Raymond Eyre said the offer was ‘wildly in excess of anything we might have contemplated at the outset’, and their buyer lost over £3m when they sold the property just four years later.

While the renovation was going on at Burnsall Street, the Eyres applied for planning to refurbish their Holland Park property, creating a new swimming pool in the basement, as well as lowering the existing floor to heighten the ceilings in the family room.

After the sale of Burnsall Street, and the renovation of the Holland Park property, the family moved back into Holland Park. Despite these coincidences the Eyres said they were ‘always pushing hard’ to sell the Holland Park property, which involved ‘speaking to estate agents more frequently’ according to Diana Eyre.

Cleo Lunt, litigator at HMRC’s solicitor’s office, argued that this was not the case, referencing an email from Saffery in November 2020 saying: ‘You have indicated that you consider that our client’s main property during (the relevant) period was and still is [the Holland Park House], at no point was [the Holland Park House] put up for sale.

‘Whilst we would agree that [the Holland Park House] has not been put up for sale we would like to understand how being a “main property” impacts on the interpretation of the legislation.’

Laurent Sykes KC, representing the Eyres, called six witnesses to the tribunal, one of whom was an estate agent from Knight Frank, Bruce Tolmie-Thomson, who stated the property had always been on the books but ‘did not recall much interest’.

Sykes also relied on the fact that the Eyres personalised the Burnsall Road property, which in his mind proved buying and selling the property was not just a ‘venture in the nature of trade’.

Lunt countered: ‘Burnsall Street was “never an asset which the appellants wished to hold and was rather acquired to be resold”, and the Eyres intended to “make a profit on the turn” following its redevelopment.’

However, Sykes stated that some of the artwork had been removed from Burnsall Road back to Holland House as it was personal to the family, as well as making a loss on the furniture that had been selected for their use and transporting the extensive wine collection of Mr Eyre to the new property was an indication of their intention to live in the property.

Additionally, the property developers recalled having ‘endless meetings’ with Mrs Eyre as she was heavily involved in the design of the building.

Lunt then stated that the couple would not have entered into an agreement with Finchatton to split the profits if they had no intention to sell it after the work had done.

However, clause 16.3.1 of the agreement with Finchatton allowed the Eyres to ‘exercise the option to retain the property, both before and after a purchase offer if their reason for refusal was that they wanted to continue to live in the house’, countering Lunt’s point.

Judge Anne Redston said: ‘We decided that the appellants are correct, and that there was no venture in the nature of trade. Having considered each of the points made very clearly and comprehensively by Mx Lunt, we nevertheless do not agree with HMRC.’

The tribunal also referenced Taylor v Good, which found that ‘a person is not engaged in a venture in the nature of trade if he “owns or buys without present intention to sell”,’ and there was no intention to sell the property for a profit when it was purchased.

The appeal was allowed in full.

HMRC loses £540k property tax dispute | 17 Oct 2023