Anthony John Henke and Alice Joyce Henke v Her Majesty's Revenue & Customs

Facts

Mr and Mrs Henke jointly bought a freehold plot of land at Houghton, Huntingdon on 25 August 1982 for £20,000, the plot proving on fencing to comprise 2.66 acres and carrying outline planning permission for a single house. Some years later they instructed an architect, obtained detailed consent in February 1991, and built Old Oak House between June 1992 and June 1993 at a main contract cost of £238,537, taking up residence in June 1993 and living there ever since; until then they had occupied two successive owner-occupied houses and then a rented property. In July 1995 detailed permission was granted for two dwelling-houses at the front of the plot, and Plot 1 (0.54 acre) was sold on 15 October 1999 for £171,000 and Plot 2 (0.54 acre) on 15 March 2001 for £230,000, the proceeds being divided equally between them. They reported the gains on Forms R40 and SA108, claiming full relief under section 222 of the Taxation of Chargeable Gains Act 1992. HMRC never opened a formal enquiry for 1999-2000, but issued assessments on 28 October 2003, and separately opened and closed an enquiry into their 2000-01 self assessment returns. They appealed on 18 November 2003 to the Special Commissioners.