Commissioners of Inland Revenue v Clydebridge Properties Ltd
| Jurisdiction | Scotland |
| Judgment Date | 22 November 1979 |
| Date | 22 November 1979 |
| Docket Number | No. 7. |
| Court | Court of Session |
FIRST DIVISION.
Revenue—Corporation Tax—Stock relief—Company's trading stock consisting of upper tenement flats—Whether buildings included within expression "land" and therefore excluded from stock relief—Finance (No. 2) Act 1975 (cap. 45), sec. 541, Sch. 10, para. 162.
The taxpayer company carried on business buying and selling small flats designed for separate occupation which were situated in tenement blocks. The company had not purchased a complete tenement block nor had it acquired all the flats comprised in any tenement block. The stock in trade of the company did not include any ground floor flats. The company was assessed for corporation tax for an accounting period of 12 months ending on 12th May 1974. The company appealed against
the assessment contending that in valuing its trading stock it was entitled to the relief afforded by Sch. 10 to the Finance (No. 2) Act 1975. The Special Commissioners allowed the appeal. The Inland Revenue appealed, contending that buildings were included within the expression "land" in terms of para. 16 (2) (b) of Sch. 10 to the Act and were excluded from relief.Held that the expression "land" in para. 16 (2) (b) of Sch. 10 to the Finance (No. 2) Act 1975 was to be read in its ordinary meaning and that, ordinarily understood, land did not include buildings; and appeal dismissed.
At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 7th March 1978 Clydebridge Properties Limited appealed against an assessment to corporation tax for the accounting period of 12 months ending on 12th May 1974 in the sum of £1889 in respect of its trade as a property dealer. The question for decision concerned whether, in valuing its trading stock, the company was entitled to the relief provided by section 54 of, and Schedule 10 to, the Finance (No. 2) Act 1975. The Special Commissioners refused the appeal and at the request of the Inland Revenue stated a case for the opinion of the Court of Session.
The case set forth that the following facts, inter alia, were proved or admitted:—(1) The company was incorporated in 1972 and since then has carried on the trade of dealing in property. The principal activity of that trade has been the purchase and sale of small tenement properties; that is to say small flats designed for separate occupation but situated in tenement blocks. (2) The company normally seeks to buy flats with vacant possession to sell on the open market to people who intend to go into occupation. In that case the purchaser will usually pay a deposit and sign a contract, paying off the balance of the purchase price over a period of up to five years. The ownership of the property remains with the company until the end of that period. (3) Rented properties are also bought in the course of the trade: some of them are sold to the sitting tenants and some are held until vacant possession is obtained, when they are sold on the open market. (4) The company has not so far in its existence, purchased a complete tenement block, but has dealt only in individual properties. In no case does the company own all of the flats comprised in any tenement block. (5) The profits of the company are charged to corporation tax under Case I of Schedule D and at the end of each accounting period it holds a substantial number of such properties which fall to be valued as stock in trade for accounting purposes, in accordance with normal and accepted accounting principles.
The Commissioners stated their decision as follows:—"The short question which we have to decide is whether in valuing its trading stock the company is entitled to the relief provided by section 54 of, and Schedule 10 to, the Finance (No. 2) Act 1975; and that turns upon whether the company's trading stock falls within the definition of trading stock in paragraph 16 of Schedule 10.
Paragraph 16 (1)...
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