Furness v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 07 July 1999 |
| Date | 07 July 1999 |
| Court | Special Commissioners (UK) |
special commissioners decision
MR T H K EVERETT
Inheritance tax - Exempt transfers and relief - Business property relief - Relevant business property - Business of managing caravan park - Whether business excluded from business property relief as consisting of making or holding investments - Inheritance Tax Act 1984 section 105 subsec-or-para (3)Inheritance Tax Act 1984 s 105(3)
MR T H K EVERETT: "Business Property Relief" is a relief from inheritance tax chargeable on a transfer of value. It is available in respect of "relevant business property" which includes "property consisting of a business" (see Inheritance Tax Act 1984 section 104 section 105 subsec-or-para (1)ss. 104 and 105(1)(a) of the Inheritance Tax Act 1984 ("the 1984 Act")). Inheritance Tax Act 1984 section 105 subsec-or-para (3)Section 105(3) excludes from the category of relevant business property, among other things, a business that consists wholly or mainly of holding investments.Inheritance Tax Act 1984 section 105 subsec-or-para (3)Section 105(3) in full reads as follows:
A business or interest in a business, or shares in or securities of a company, are not relevant business property if the business or, as the case may be, the business carried on by the company consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments.
Mr Brendan Peter James Furness ("Mr Furness") appeals against a determination dated 4 January 1999 of the Commissioners of Inland Revenue in respect of a transfer of value deemed to have been made on the death of his father Robert Michael Furness ("the deceased") on 27 September 1996. The notice of determination provided:
The Commissioners of Inland Revenue have determined, in relation to the deemed disposal for the purposes of inheritance tax on the death on 27 September 1996 of Robert Michael Furness that his interest in the business known as Riverside Caravan Park was not relevant business property, having regard to the provisions of Inheritance Tax Act 1984 section 105 subsec-or-para (3)section 105(3)Inheritance Tax Act 1984, for the purposes of Inheritance Tax Act 1984 section 104section 104 of that Act.
Prior to the hearing of this appeal the Inland Revenue have accepted that the deceased's interest in Riverside Caravan Park ("the Park") was an interest in a business within the provisions of Inheritance Tax Act 1984 section 105 subsec-or-para (1)section 105(1)(a) of the 1984 Act. The Inland Revenue have also accepted that the business did not consist wholly or mainly of making investments. The sole issue before me is whether the business of Riverside Caravan Park consisted "wholly or mainly of holding investments" within the provisions ofInheritance Tax Act 1984 section 105 subsec-or-para (3)section 105(3) and was accordingly not "relevant business property".
The evidence before me consisted of a brief statement of agreed facts, a bundle of documents and the oral evidence of Mr Furness and of his accountant Mr Josiah Arthur Swingler FCA. Witness statements were provided for each of the witnesses and these statements served as the evidence in chief for each of them. The statement of Mr Furness had attached four exhibits, which included photographs of the past and present appearance of the Park. The statement of Mr Swingler had attached to it five pages of accounts and calculations.
The deceased died on 27 September 1996 and probate of his Will was granted to his executors Michael John Cooksey and Mr Furness on 23 December 1996.
The deceased's estate included his interest as a partner in the firm of Riverside Caravan Park, Kidderminster Road, Bridgnorth, which he had conducted on his own account until April 1994 when he took into partnership his son Mr Furness. Thereafter the deceased owned a two-thirds share in the Park and his son the remaining one-third share.
Until April 1994 Mr Furness had been employed by his father and undertook mainly manual work at the Park.
The Inland Revenue accounts submitted by the executors disclosed a net estate amounting to £693,061. Of that sum the executors placed the value of the deceased's interest in the Park at £600,000.
The Park was established originally by Mr Furness' grandfather in 1945 and was then called Riverside Holiday Camp. The deceased took over the running of the business on leaving the army in or about the year 1960.
Since 1995 the Park has been licensed for 218 static caravans and 8 touring ones. In addition, caravan rallies are held at weekends and until the death of the deceased about seven rallies per year were held when there may have been as [sic] 90 caravans on one field. The rallies are held during summer months and since his father's death Mr Furness has increased the number of rallies held.
The static caravans are provided with mains electricity and mains drainage. The touring caravans are provided with mains electricity whilst the rally caravans are self-sufficient, although they have access to a mains supply of water from a stand pipe and like the touring caravans, can use the facilities provided for the emptying of chemical toilets.
There are no written letting agreements entered into by the residents of the Park. Lettings are purely oral but governed by a set of rules contained in an information sheet and code of conduct, a copy of which was provided in the bundle of documents. Rents for the sites of the static caravans are payable annually in advance. I infer that fees are paid by touring caravans according to their length of stay. An all-inclusive fee is paid in relation to rally weekends.
Permanent residence at the Park is not permitted. Caravans are not allowed to be occupied during the month of February in each year.
Various facilities are provided at the Park for the entertainment and amusement of residents. A pine cabin is used as a club house where entertainments are provided and a bar operates. The bar is operated by employees of Mr Furness, who hold the Justices licence. They pay a rent to Mr Furness and retain the profits from the bar. All residents of the Park are permitted to use the club without additional payment. The cabin has two fruit machines, which are rented and managed by Mr Furness. He takes the profits from them.
There is also a shop which operated from a building at the time of the deceased's death. That building has since been demolished and replaced...
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