Batey v Wakefield
| Jurisdiction | England & Wales |
| Judgment Date | 22 June 1981 |
| Date | 22 June 1981 |
| Court | Court of Appeal (Civil Division) |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Capital gains tax-Private residence exemption-Whether gain on sale of caretaker's separate bungalow exempt-S 29, Finance Act 1965.
In 1959 the taxpayer completed the building of a 4-bedroom house for occupation by himself and his family. By 1974 the land held with the house was 1.1 acres.
From 1961 the taxpayer's employment required him to live in a London flat first as a tenant and then as owner. Burglaries at and near the house led the taxpayer to decide to employ a caretaker/gardener and his wife, as a housekeeper, for whom a bungalow was built in 1966 which they occupied rent free in return for maintenance and oversight of the house. The main occupation of the caretaker/gardener was that of a farm labourer elsewhere. The bungalow had its own access to a different road from that of the house and the two buildings were separated by a yew hedge established prior to the building of the bungalow and by the width of a tennis court. In 1967 the taxpayer elected to treat the house as his main residence.
In 1974 the London flat was sold and there was no longer a need for the caretaker. The bungalow was sold on 8 March 1974 with 0.15 acres for £18,000, the base value was £6,105.
The taxpayer contended that the gain of £11,895 on the disposal was exempt as a gain realised on the disposal of part of his residence. The Inspector contended that because the bungalow was physically a separate dwelling the gain was excluded from relief. The General Commissioners upheld the taxpayer's contention and the Crown appealed.
The Chancery Division, dismissing the Crown's appeal, held, that under s 29(1)(a) of the Finance Act 1965 buildings separate from that dwelt in by the taxpayer himself, but appurtenant to it and occupied for its purposes, were included in his "dwelling-house", so that on the facts the bungalow had been properly held within the exemption claimed.
Held, in the Court of Appeal, unanimously dismissing the Crown's appeal,
(1) that a taxpayer's dwelling-house could include another person's dwelling-house if the user of the latter was for the purpose of serving the former as a residence;
(2) that it was a question of degree, depending on the facts of separation (and for the Commissioners to decide) whether such another person's dwelling-house, being a building physically separated from the other buildings occupied by the taxpayer, formed part of the taxpayer's dwelling-house;
(3) on the facts found, the Commissioners could reasonably hold that the bungalow was a part of the taxpayer's dwelling-house.
Stated under s 56 of the Taxes Management Act 1970 by the Commissioners for the General Purposes of the Income Tax for the Division of St. Martins in the Field in the City of Westminster for the opinion of the High Court of Justice.
1. At a meeting of the said Commissioners held at The Law Society's Hall, Chancery Lane, in the City of Westminster on 15 September 1977, Trevor Stanley Wakefield (hereinafter called "the taxpayer") appealed against an assessment of £11,895 made on him under the provisions of s 19 of the Finance Act 1965 in respect of capital gains in the year 1973-74.
2. The question for our determination was whether a gain agreed at £11,895 arising from the sale by the taxpayer of a building together with a small area of land known as "Paddocks Lodge", Cross Lane, Marlborough in Wiltshire fell within the exemption to capital gains tax provided by s 29(2) of the said Act.
3. The taxpayer appeared in person; the Revenue (Respondent before us but Appellant in the Stated Case) was represented by C. Chapman, Inspector Higher Grade.
4. It was proved or admitted that:
(i) the taxpayer purchased approximately 1.5 acres of land in 1957 at Marlborough in Wiltshire upon which at the time were situated buildings consisting of brick-built loose boxes, a forage store and a double garage with a large room above used as a billiard room. Shortly thereafter the existing buildings were sold by the taxpayer to his parents-in-law. As a result of this and a further disposal of land, the area of land held by the taxpayer from 1966 to 1974 was about 1.1 acres;
(ii) in 1959 the taxpayer completed the building of a dwelling-house known as "Paddocks", Cross Lane aforesaid for occupation by himself and his family. The accommodation consisted of a main double bedroom, a spare room and two smaller bedrooms used by the taxpayer's children, with downstairs a lounge, dining room, kitchen and study. The original buildings on the land were altered and occupied by the taxpayer's parents-in-law;
(iii) to facilitate the exercise of the taxpayer's business duties, in 1961 the taxpayer's employer purchased a flat at 27 Brompton Square, London S.W.3 which the taxpayer occupied during weekdays, and where his wife and daughter accompanied him during such weekdays, leaving "Paddocks" unattended. In 1966 the taxpayer purchased the flat from his employer. The occurrence of several burglaries in the neighbourhood of "Paddocks" and the burglary of "Paddocks" itself on one occasion allied to the impracticability of maintaining the grounds of "Paddocks", led the taxpayer to seek the services of a caretaker/gardener and his wife as a housekeeper, for whom (though the planning permission did not preclude other use) "Paddocks Lodge" was built in 1966, comprising a chalet bungalow with one main bedroom. "Paddocks Lodge" was occupied free of rent and rates by a caretaker/gardener and a housekeeper (his wife) and their son, in return for work done in the maintenance and oversight of "Paddocks". The main occupation of the gardener was that of a farm labourer, and although the taxpayer's agreement with the gardener did not require him and his family to live at "Paddocks Lodge" we were satisfied from explanations given to us by the taxpayer that the occupation of "Paddocks Lodge" was intended to enable the gardener and his wife to perform the duties of their employment with the taxpayer. "Paddocks Lodge" has a detached garage and its own access to a different road from that giving access to "Paddocks". "Paddocks Lodge" was separated from "Paddocks" by a yew hedge which had been established prior to the completion of the building of "Paddocks Lodge" and which the taxpayer saw no reason to uproot;
(iv) by a notice dated 3 April 1967 the taxpayer elected under the provisions of s 29 of the Finance Act 1965 to treat "Paddocks" as his only or main residence;
(v) by 1974 the taxpayer's business commitments had changed and it was no longer necessary to retain the flat at 27 Brompton Square and the same was accordingly sold. The taxpayer and his family once again took up full time residence at "Paddocks" and the necessity for a caretaker/gardener there no longer existed;
(vi) on 8 March 1974 "Paddocks Lodge" was sold with about 0.2 acre for the sum of £18,000;
(vii) since the sale of "Paddocks Lodge" the taxpayer and his family have continued to reside in "Paddocks" as their sole residence;
(viii) at all material times "Paddocks" and "Paddocks Lodge" were separately rated. "Paddocks" comprises approximately 2200 square feet and has a rateable value of about £550. "Paddocks Lodge" has 1150 square feet and its rateable value is £290. At all material times the taxpayer paid the rates of "Paddocks Lodge";
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(ix) the assessment to capital gains was made in the following figures:
£
Net sale price of "Paddocks Lodge"
18,000
Less base value for the purpose of capital gains tax
6,105
Balance being the amount of the assessment
11,895;
(x) photographs and plans of "Paddocks" and "Paddocks Lodge" produced to us represented...
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