Fraser v London Sports Car Centre
| Jurisdiction | England & Wales |
| Judgment Date | 10 July 1985 |
| Date | 10 July 1985 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Mr. A. Parke Q.C. and Mr. A. Moses (instructed by Solicitor of Inland Revenue) for the Crown.
Mr. D. Milne (instructed by Titmuss Sainer & Webb) for the taxpayer.
Before: The Master of the Rolls (Sir John Donaldson), Neill and Nourse L.JJ.
Corporation tax - Trading stock - Stock relief - Whether taxpayer entitled to claim relief for increase in trading stock and work in progress - Meaning of "its trading stock" - Taxpayer in business of selling cars purchased from supplier - Taxpayer paying full price for cars excluding VAT and car tax - Reservation of title until cars sold by taxpayer - Whether taxpayer required to own stock before entitled to claim relief - Finance Act 1976 schedule 5 subsec-or-para 9Finance Act 1976, Sch. 5, para. 9Finance Act 1976 schedule 5 subsec-or-para 29 schedule 5 subsec-or-para 2929(1), 29(5).
This was an appeal by the Crown from a decision of Nicholls J. ([1984] BTC 409) that a taxpayer's trading stock for stock relief purposes was stock with which it carried on its trade whether or not the taxpayer owned that stock.
The taxpayer company carried on the trade of selling sports cars. It obtained its stock of cars from a supplier (AR) under an agreement the purpose of which was to defer payment of Value Added Tax (VAT) and car tax on each car until it was sold by the company. Under that agreement, the cars were delivered to the company after payment of the full price, excluding VAT and car tax. The cars remained the property of AR unless and until one of a number of events (including the sale of the car) occurred. Once the taxpayer gained title to the car it paid AR a sum equal to the VAT and car tax attributable to it.
It was not disputed that the proper accounting treatment of the cars was that they should be brought into account in computing the company's profits. However, the question arose whether the availability of stock relief was restricted to trading stock owned by the taxpayer. The taxpayer claimed that for the accounting period to 31 December 1976 it was entitled to stock relief in respect of stock which it held even though it might not yet have title to that property. The Crown contended that "property" in Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1) of Sch. 5 to the Finance Act 1976 was a word which connoted ownership. Therefore, the words "its trading stock" referred only to trading stock owned by the company.
The Special Commissioners and Nicholls J. held that a trader was entitled to stock relief on stock with which he carried on his trade. The Crown appealed to the Court of Appeal.
Held, dismissing the Crown's appeal:
1. The word "property" as it appeared in Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1) did not connote ownership. Its function there was, by making use of the well-known terms "real property" and "personal property", to identify those things on which tax relief might be claimed.
2. Parliament should not be credited with an intention to ignore the commercial realities of cases and to hang entitlement to stock relief on the bare peg of ownership. Entitlement to relief was a question of fact and degree to be decided in particular circumstances.
3. The correct approach was to read the legislation as referring to cars sold in the ordinary course of the company's trade. Therefore, the cars were part of the company's trading stock on which it was entitled to stock relief.
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