Taxpayers successfully claimed principal private residence relief from capital gains tax on the sale of a flat occupied by an elderly parent. The flat was originally owned by the taxpayers' mother/mother-in-law. She had sold it to the taxpayers subject to an agreement permitting her to remain in occupation for life or until remarriage (a small amount of consideration was paid by the mother/mother-in-law to remain in occupation and she was to pay for insurance, repairs and all outgoings). The flat was later sold when she could no longer manage the stairs and more suitable accommodation was found for her.
It was found that, in acquiring the flat on terms which included the agreement, the taxpayers were assuming the role of trustees. They did not become absolutely entitled to the flat with the exclusive right to direct how the flat should be dealt with. The taxpayers' subsequent actions in dealing with the property clearly showed that they had accepted obligations associated with a trust and the role of trustee. Their interest was a 'settled interest' for which principal private residence relief was available.