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Chapter CTM03591

Document Cited authorities 3 Cited in Related
Vincent
Published date16 April 2016
Record NumberCTM03591
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

Business is a wider concept than trade. To be in business a company should be actively engaged rather than passive, although the degree of emphasis that should be placed on being active was a matter of debate in the cases above. Generally when a company turns assets to account and earns an income return it is carrying on a business. But there may be exceptional cases on particular facts. Several recent cases demonstrate the importance of fact finding and provide guidance on the factors that may be relevant in considering whether a company’s activities amount to a business.

In the case of HMRC v Salaried Persons Postal Loans [2006] EWHC 763 the company traded in money lending until 1995 after which it continued to let former premises which had been let continuously after it had relocated in 1966. The Special Commissioner made a finding of fact that the continued letting of the premises did not constitute carrying on a business; although it was relevant that the company’s actions in letting the property were authorised by its Memorandum of Association, this was not determinative. The High Court held that it did not inevitably follow that a company was carrying on a business because it received a particular type of income such as rent which was generated from holding a particular type of asset such as land. The property had not been purchased as an investment, so the limited property related activity coupled with the fact that the premises were a small part of overall assets entitled the Commissioner to reach the view that the company was not in business.

The Special Commissioners in Land Management Ltd v Fox [2002] SpC306 found on the facts that a company letting residential freehold property was in business. Supporting factors included the company’s Memorandum of Association which specified that it was incorporated for the purpose of undertaking business of an investment nature, the receipt of interest from an associated company, rent and bank interest, and incurring expenditure on repairs, insurance and, in two of the years, on professional fees. The approach taken was to examine the activities of the company separately and then to look at the...

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