Chapter SVM111160
| Published date | 13 March 2016 |
| Record Number | SVM111160 |
| Court | HM Revenue & Customs |
No hard and fast definition of ‘investment’ has been made by the courts.
Taxpayers may seek to infer that the wording “holding investments” connotes passive ownership and argue that extensive personal involvement by the deceased/transferor in the business cannot be classed as “holding investments”.
HMRC contested this view in the case of Moore deceased (see below) and our argument that a business of holding investments can exist whether the landlord was actively involved or essentially passive was upheld by the Special Commissioners.
The interpretation and application of s.105(3) have been tested before the Special Commissioners in the estates of Violet Moore (commercial premises) and Bertha Burkinyoung (furnished lettings) and also Weston v IRC (2000) STC 1064 and Stedman v IRC [2002] WTLR 1357 (caravan parks).
This last case was eventually decided in the Court of Appeal as IRC v George (2003) EWCA 1763 (SVM111150). More recently, the tribunals and courts have heard a number of cases involving different types of businesses which HMRC has viewed as investment businesses. These cases are considered below (serviced offices), SVM111180 (holiday lets) and SVM111180 (grazing lets).
In the George case, the Court of Appeal observed that the decision in Moore was right on its facts. It also quoted with approval the Special Commissioner’s view in the George case that there was a wide spectrum of business activity with investment activity at one end and trading activity at the other. It also agreed with the Special Commissioner’s view that previous decisions have been very much decided on their own facts.
Those cases concerned unincorporated businesses but the decisions on whether a business consisted wholly or mainly of making or holding investments are regarded as being equally applicable to the activities of companies.
These decisions of the Special are also considered to have equal application in other lettings cases.
Lettings of commercial premisesThese may tend to be the most clear cut type of ‘investment’ cases as written tenancy agreements - detailing both the landlord’s and the tenant’s obligations - may exist and there may be little other activity on the part of the landlord.
Martin & Horsfall (Executors of Violet Moore deceased)-v- CIR (1995) SC2
At her death in 1991, Mrs Moore owned a site on which several industrial units were erected. Since the 1960s she and her husband (who died in 1989) had let the units on three-year leases to various businesses. The activities carried out by Mr and Mrs Moore (she continued after his death) were listed as:
- exterior repair and maintenance (including repairing walls, unblocking drains and gutters)
- exterior decoration
- maintenance of common areas (sweeping up litter, trimming hedges, resurfacing tarmac, maintaining toilet areas)
- maintaining the heating system for the site
- policing common areas (sorting out parking and rubbish problems)
- advertising for and interviewing prospective tenants
- negotiating renewal of leases
- dealing with tenants’ complaints.
Mr and Mrs Moore were extensively and personally involved in...
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