Barrett (Inspector of Taxes) v Powell
| Jurisdiction | England & Wales |
| Judgment Date | 03 February 1998 |
| Date | 03 February 1998 |
| Court | Chancery Division |
Chancery Division.
Lightman J.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The taxpayer appeared in person.
The following cases were referred to in the judgment:
Atkinson (HMIT) v Dancer, Mannion (HMIT) v Johnston TAXTAX[1988] BTC 364; 61 TC 598
Jarmin (HMIT) v Rawlings TAXTAX[1995] BTC 3; 67 TC 130
McGregor (HMIT) v AdcockTAX (1977) 51 TC 692
Pepper (HMIT) v Daffurn TAXTAX[1993] BTC 277; 66 TC 68
Wase (HMIT) v Bourke TAXTAX[1996] BTC 3; 68 TC 109
Capital gains tax - Retirement relief - Farm land - Farmer received sum for surrender of agricultural tenancy - Taxpayer farmed land for a further two years without statutory security under licence from landlord - Whether "disposal" on surrender - Whether entitled to relief -Taxation of Chargeable Gains Act 1992 section 163Finance Act 1985, s. 69(2) (Taxation of Chargeable Gains Act 1992 section 163 subsec-or-para (2)Taxation of Chargeable Gains Act 1992, s. 163(2)).
This was an appeal by the Revenue against a decision of the general commissioners for Bletchley that the taxpayer was entitled to retirement relief pursuant to the Taxation of Chargeable Gains Act 1992 section 163Finance Act 1985, s. 69 on the surrender of an agricultural tenancy in circumstances where he continued to farm the land under licence from the landowner after the surrender.
The taxpayer, who had attained the age of 60, had farmed land for many years, some of which he owned and some under a protected agricultural tenancy from the Milton Keynes Development Corporation ("the landlord").
The landlord made a payment on surrender of the tenancy, and on the same date granted to the taxpayer a licence to farm the land in question as he had done before the surrender. The licence continued for two seasons.
The surrender was not a disposal of a business asset withinTaxation of Chargeable Gains Act 1992 section 69 subsec-or-para (2)s. 69(2)(b) because the business did not cease to be carried on before the relevant disposal. The question was whether the disposal of the tenancy was the disposal of "the whole or part of a business" within the meaning of the Taxation of Chargeable Gains Act 1992 section 163 subsec-or-para (2)Finance Act 1985, s. 69(2)(a).
Held, allowing the Revenue's appeal:
1. The appropriate exercise was to look at the position before and after the disposal and then ask whether as a matter of fact that amounted to a cesser of the whole or part of the business (Atkinson (HMIT) v Dancer, Mannion (HMIT) v JohnstonTAX [1988] BTC 364 and Pepper (HMIT) v Daffurn TAX[1993] BTC 277 applied).
2. The commissioners had not applied the correct test. They must have thought that the security afforded by an agricultural tenancy was crucial, but the fact that the future of the business so far as it was carried on at the tenanted land became precarious did not mean that the taxpayer ceased to carry on the same business activity afterwards as before, or that he had made a disposal of any part of his business. There was no change in the character of his business and no abrogation of a separate part of his business.
1. At a meeting of the general commissioners for the division of Bletchley held on 28 September 1995 Robert James Powell a retired tenant farmer ("the taxpayer") appealed against an assessment to capital gains tax for the year ended 5 April 1990. Details of the assessment were as follows:
Tax year |
Chargeable gains assessed |
Capital gains tax charged |
1989-90 |
£120,000 |
£46,000 |
The assessment was in respect of an estimated chargeable gain. The agreed chargeable gain for determination was £49,672.
2. The point at issue and question before the commissioners at the hearing for determination was whether a disposal by the taxpayer of 136.2 acres of tenanted land under or pursuant to the terms of a deed of surrender dated 29 March 1990 amounted to a disposal of part of a business formerly carried on by the taxpayer under the provisions ofTaxation of Chargeable Gains Act 1992 section 163 subsec-or-para (2)s. 69(2)(a) of the Finance Act 1985 and therefore qualified for retirement relief under the provisions ofTaxation of Chargeable Gains Act 1992 section 163 subsec-or-para (1) schedule 6s. 69(1) and Sch. 20 of that Act.
3. The taxpayer was represented before the commissioners by Duncan Anderson a partner in the firm of Hicks Anderson & Co chartered accountants. The inspector was represented by Mr JK Mullan an inspector of taxes. No witnesses were called to give evidence.
[Paragraph 4 listed the documents proved or admitted in evidence.]
From the evidence adduced the commissioners found the following facts admitted or proved and relevant to this case:
(i) A disposal took place on 29 March 1990.
(ii) The chargeable person is the taxpayer who was born on 25 June 1925 and had thus satisfied the age attainment condition of 60 years at the time of the disposal as required by Taxation of Chargeable Gains Act 1992 section 163 subsec-or-para (1)s. 69(1)(a) of theFinance Act 1985.
(iii) The taxpayer was at the time of the disposal and had for many years prior thereto been part land owning and part tenant farmer at Southside Farm, Milton Keynes Village, Milton Keynes, his landlord at the relevant time being Milton Keynes Development Corporation in succession to The Society of Merchant Venturers of the City of Bristol. If the disposal satisfied the requirements of Taxation of Chargeable Gains Act 1992 section 163 subsec-or-para (2)s. 69(2) of the Finance Act 1985 it was a material disposal as defined by the provisions of s. 69 of that Act.
(iv) The taxpayer's farm business consisted of growing grain, in particular wheat, barley and rape and in addition ten cross Hereford steers were kept.
(v) As at 22 February 1990 the taxpayer's farm comprised approximately 326 acres, of which: 100 acres were held in freehold ownership; 136.2 acres were held under an agricultural tenancy agreement; 90 acres were held under licence.
(vi) On 22 February 1990 the taxpayer was served with a notice to quit the 136.2 acres of tenanted land pursuant to Sch. 3 Case B of theAgricultural Holdings Act 1986 on the ground that the land was required for a use other than for agriculture for which permission had been granted under s. 7(1) of the New Towns Act 1981. The said notice to quit required the taxpayer to give up the tenanted land on 25 April 1990.
-
(vii) Following negotiations voluntarily entered into between the taxpayer and his landlord, Milton Keynes Development Corporation, a deed of surrender was executed on 29 March 1990. The relevant parts of that deed were as follows:
2.3. It has been agreed that the Tenant will surrender all his estate and interest in the two pieces of land shown edged red on the plan annexed hereto containing One hundred and thirty six decimal point two acres (136.2) or thereabouts together with the farmhouse buildings erected thereon …
3. In consideration of the sum of One hundred and twenty thousand pounds (£120,000) paid by the Landlord to the Tenant … the Tenant as beneficial owner surrenders and yields up and releases to the Landlord all his estate interest and rights in the Surrendered Land …
5 … the Tenant shall be entitled to retain the 4 bay dutch barn and corn store … and shall remove the same from the Surrendered Land on or before the 29th September 1991 …
(viii) The agricultural tenancy was an asset for capital gains tax purposes and the consideration received by the taxpayer on its surrender is chargeable to capital gains tax under the provisions ofTaxation of Chargeable Gains Act 1992 section 21 section 22ss. 19 and 20 of the Capital Gains Tax Act 1979.
(ix) The taxpayer immediately licensed back from the landlord all of the 136.2 acres of surrendered land, apart from small areas of the land surrendered for constructions of new roads and was allowed to occupy the farmhouse until 29 September 1991 after which he resided at 16 Walton Road, Milton Keynes Village, Milton Keynes. The taxpayer was originally asked to quit the farmhouse in March 1991, but to assist the Development Corporation he stayed until 29 September 1991.
(x) The taxpayer continued to farm the land, which included the 136.2 acres for a further two seasons. All licensed land was returned to the landlord on 29 September 1991. He continued to farm the land owned by himself until March 1993. The level of the taxpayer's farming operations before and after the execution of the deed of surrender on 29 March 1990 remained unchanged until 29 September 1991, after which he farmed the land owned by himself and farming operations ceased on 29 September 1992 apart from the sale of harvest from storage. The 1992 harvest was stored at Dalgetty Storage, Finmere, Buckinghamshire until its sale. The business ceased on 5 April 1993.
(xi) The taxpayer's Income and Corporation Taxes Act 1988Sch. D Case II profits assessable for the six years to 5 April 1993 were as follows:-
Year ended |
Profit |
Total sales |
5 April 1988 |
£43,206 |
£187,210 |
5 April 1989 |
£49,419 |
£131,213 |
5 April 1990 |
£46,701 |
£123,780 |
5 April 1991 |
£38,199 |
£109,606 |
5 April 1992 |
£39,470 |
£102,757 |
5 April 1993 |
£53,470 |
£74,615 |
(xii) On 27 March 1991 the taxpayer was assessed to capital gains tax for the...
To continue reading
Request your trial
-
Purves (Inspector of Taxes) v Harrison
...cases were referred to in the judgment: Atkinson (HMIT) v Dancer; Mannion (HMIT) v Johnston TAX[1988] BTC 364 Barrett v Powell TAX[1998] BTC 59 Clarke (HMIT) v Mayo TAX[1994] BTC 225 Jarmin (HMIT) v Rawlings TAX[1995] BTC 3 Capital gains tax - Retirement relief in respect only of single dis......
-
Gilbert (t/a United Foods) v HM Revenue and Customs
...did not appear to have changed wholly or even noticeably after the disposal. 20.HMRC cited the cases of Barrett (HMIT) v Powell TAX[1998] BTC 59; 70 TC 432, Graham v Green (HMIT) TAX(1925) 9 TC 309, McGregor (HMIT) v Adcock TAX(1977) 51 TC 692, Atkinson (HMIT) v Dancer TAX[1988] BTC 364, Ma......
-
Russell
...the taxpayer partly owned, was a disposal of a part of the business. Held, dismissing the taxpayer's appeal: In Barrett (HMIT) v PowellTAX[1998] BTC 59 ("Barrett"), Lightman J quoted with approval the following judgment of Peter Gibson J in Atkinson (HMIT) v Dancer; Mannion (HMIT) v Johnsto......
-
Purves (Inspector of Taxes) v Harrison
...separated in time was to be found in Atkinson v DancerUNK ((1988) STC 758), Jarmin v RawlingsUNK((1994) STC 1005) and Barrett v PowellUNK (1998) STC 283, 291) where Mr Justice Lightman said: "Substantially simultaneous disposals of assets used in a business may be viewed together in judging......