Chapter BIM35410

Published date22 November 2013
Record NumberBIM35410

The taxation treatment of expenditure on land on which there are growing crops depends on the nature of the crop.

In CIR v Pilcher [1949] 31TC314, the company bought a cherry orchard at a time when the fruit crop was almost ready for picking. The question was whether the price paid for what was admitted to be a capital asset, an interest in land, could be apportioned. The company claimed that a proportion of the price paid at auction for the land related to the cherries on the trees that were almost ready for picking. The company claimed to deduct £2,500 representing the cost of ripening cherries. Croom-Johnson J found that the expenditure was capital. He explained that the Commissioners’ contrary decision gave ‘the go-by’ to the principles established in the decided cases.

Minerals are part of the land until extracted. A mining concern buying land does not buy the minerals as such. The company buys an interest in the land with the right to win minerals from the land. The same principle can apply to the fruits of the land and the Pilcher case is interesting for the review of the authorities as they apply. Broadly, you have to distinguish between those crops growing on the land which by law are treated as part of the land and belong to the owner, and other crops which by long established rule of law are the property of the tenant. These latter include the normal annual crops of an arable farm - the fruits of industry rather than of nature; fructus industrialis as against fructus naturalis. On the other hand, trees and bushes that produce not one crop but a succession of crops, are, together with their crop, the property of the landlord. The tenant in possession of such land when the crop ripens has the right to pick it and then it becomes theirs, but if they leave before the crop is ripe then the crop remains the landlord’s property.

It follows from these legal rules about the ownership of land, that in any business which consists of taking produce off the land the types of crop which belongs to a tenant are akin to trading stock. But trees are normally part of the land. If the trader owns the land the trees are fixed capital because they are part of that land. Hence, no deduction can be made in respect of any fruit or trees already growing on the land when it is bought. If, however, the business is one of selling trees a deduction can be made for seedling trees bought separately and planted on the land. Once planted the trees become part of the land -...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT