Goodwin v Curtis (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 23 July 1996 |
| Date | 23 July 1996 |
| Court | Chancery Division |
Chancery Division.
Sir John Vinelott.
David Ewart (instructed by Alison Trent & Co) for the taxpayer.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Fox v Stirk and Bristol Electoral Registration OfficerELR [1970] 2 QB 463
Kirkby v Hughes (HMIT) TAXTAX(1992) 65 TC 532; [1993] BTC 52
Levene v IR CommrsELR [1928] AC 217
Sansom & Anor (Ridge Settlement Trustees) v Peay (HMIT)TAX(1976) 52 TC 1
Capital gains tax - Private residence relief - Farmhouse purchased by company as part of property for development - Taxpayer purchased farmhouse from company for private residence but put it on the market before completion of purchase and occupied it until sale - Whether acquisition made wholly or partly for the purpose of realising a gain - Whether gain qualified for exemption - Capital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, s. 101(Taxation of Chargeable Gains Act 1992 section 222Taxation of Chargeable Gains Act 1992, s. 222).
This was an appeal by an individual taxpayer who acquired and disposed of three properties between April and December 1985, occupying each for a short time, from a decision of the general commissioners for Cirencester that he could not claim exemption from capital gains tax for all of them as his main or only private residence.
In 1983 the taxpayer and an associate set up a company, SL Ltd, to purchase a property, Hazelton Farm, for development. The property comprised four parts, the farmhouse, a yard and two barns. The yard was to be developed, but the farmhouse was to be sold by a sub-sale to the taxpayer and the barns were to be sold by sub-sales to the taxpayer's associate and his daughter.
Contracts were exchanged with the vendor in September 1983 with completion fixed for March 1984 and SL Ltd contracted to sell the farmhouse to the taxpayer for £70,000, completion to take place seven days after service of a notice by SL Ltd. SL Ltd duly completed the purchase of the property on 7 March 1985 and on 1 April the taxpayer completed the purchase of the farmhouse from SL Ltd.
About that time the taxpayer separated from his wife. The farmhouse was too large for the taxpayer alone so he had instructed agents to sell the farmhouse in March, but he lived alone at the farmhouse for a short time until it was sold for £177,000. The sale was completed on 3 May 1985.
In the meantime another business in which the taxpayer was concerned had been negotiating for the purchase of a small cottage to be used as offices. Contracts were exchanged, but the business was unable to complete. The taxpayer, who had sold the farmhouse and had nowhere to live, himself paid £24,000 for the cottage and moved into it while he looked for another house. He found a four-bedroom house, Stoneways, which he purchased for £58,000 financed by a mortgage. He eventually sold the cottage for use as offices for £40,500 in November 1985. The taxpayer then attempted a reconciliation with his wife. He moved to London and sold Stoneways for £67,000, completion taking place in December 1985.
The taxpayer appealed to the general commissioners against assessment to capital gains tax in respect of the gains realised on the disposal of the three properties, the farmhouse, the cottage and Stoneways. The issues were whether the properties were bought and sold in the course of a trade carried on by the taxpayer and alternatively, if not, whether the gains accruing to the taxpayer were exempt as the disposal of dwelling houses which at any time during his ownership had been his only or main residence within the meaning of Capital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, s. 101(Taxation of Chargeable Gains Act 1992 section 222Taxation of Chargeable Gains Act 1992, s. 222).
The commissioners determined that the taxpayer was not carrying on a trade. They also determined that the gains realised on the sale of the farmhouse and the cottage were liable to capital gains tax, but that the gain in relation to Stoneways was exempt.
The taxpayer appealed against the commissioners' decision in relation to the farmhouse only.
Held, dismissing the taxpayer's appeal:
1. The question was whether the farmhouse was the taxpayer's residence. Since the word "reside" was defined as "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place" a considerable degree of permanence and continuity would have been required to have turned a simple occupation into residence. Levene v IR Commrs [1928] AC 217 per Viscount Cave LC at p. 222 applied.
2. In view of the fact that the taxpayer decided to sell the farmhouse even before completion, the commissioners were entitled to regard his occupation as temporary accommodation rather than as residence.
3. The general scheme of the legislation was to exempt a person's home from capital gains tax and since the taxpayer had not occupied the farmhouse as his home the commissioners were entitled to conclude that the taxpayer was not entitled to relief. Sansom & Anor (Ridge settlement trustees) v Peay (HMIT) (1976) 52 TC 1per Brightman J at p. 6 applied.
1. At a meeting of the commissioners for the general purposes of the income tax for the division of Cirencester held on 23 June 1993 Mr Charles Paul Goodwin ("the taxpayer") appealed against the assessments set out below.
Tax Tax Year |
Source Amount assessed |
|
(A) |
Income Tax 1985/86 |
Property Dealer £130,000 |
Class 4 N.I.C. £130,000 |
||
(B) |
Capital Gains Tax 1985/86 (alternative to (A) above) |
Land/buildings £130,000 |
(C) |
Capital Gains Tax 1986/87 |
Land/buildings £10,000 |
No facts had been agreed between the parties prior to the meeting and no statement of facts was made available to the commissioners during the meeting. After the parties had introduced their cases and produced documentary and oral evidence no further time was available that day for the parties to summarise the evidence or present their arguments and the commissioners accordingly adjourned the hearing.
In the light of the volume of evidence and length of the proceedings the general commissioners instructed their clerk to prepare detailed minutes of the meeting of 23 June 1993 and to submit copies of the minutes to both parties to enable them to review their cases.
Arrangements were then made for a second hearing to take place on 23 February 1994. The parties were given an opportunity to comment on the accuracy of the minutes of the contentions. The general commissioners thereafter withdrew to consider their decision and then announced to the parties that they had determined the appeals in respect of assessments (A) and (C) and the six other assessments. The commissioners announced their decision in principle in respect of assessment (B) and invited the parties to agree appropriate computations.
There was then a further lapse of time, during which no figures were supplied by the taxpayer and computations were accordingly not agreed. In the circumstances, on 15 March 1995 the commissioners issued to the taxpayer a commissioners' notice requiring delivery of particulars, as a result of which draft computations were supplied by the taxpayer on 12 April 1995.
The third hearing took place on 26 April 1995 for the commissioners to determine the outstanding assessment in the absence of agreement between the parties. During the third hearing it became apparent that additional evidence was required by the taxpayer who, therefore, arranged for document number 59 (to which reference is made in s. 4 herein) to be faxed to the Magistrates Court Office by the taxpayer's solicitors. The parties thereafter made their final submissions in respect of the outstanding assessment. The commissioners withdrew to consider their decision and immediately thereafter announced their final decision to the parties.
(A) The questions for consideration by the commissioners in respect of the assessments (A) and (B) were at the outset:
(i) whether the taxpayer's activities involving the purchases and sales of the properties known as Hazleton Manor Farmhouse, Ayton and Stoneways ("the properties") constituted trading or the carrying on of an adventure in the nature of a trade or, alternatively;
(ii) whether the said activities gave rise to a liability for capital gains tax and whether the taxpayer was entitled to any exemption from any capital gains.
It subsequently became apparent that additional questions arose, as to which see s. 6 herein.
(B) As to the appeal in respect of assessment (C) relating to the disposal of 15 Islingword Road, the parties indicated that the appeal could be adjourned sine die without further consideration by the commissioners.
The taxpayer represented himself. At the first hearing the Revenue was represented by Mr J Holland of Brighton 2nd District. At the meetings on 23 February 1994 and 26 April 1995 the Revenue was represented by Mr P Frost of Brighton 2nd District.
[Paragraph 4 listed the documents proved or admitted before the commissioners.]
As a result of the evidence both oral and documentary the commissioners found the following facts proved or admitted:
(A) The taxpayer was born in July 1952. Between 1974 and 1978 he worked for Sterling Homes, a subsidiary of the Allied London Group. From 1977 to October 1978 the taxpayer owned and resided at 82 West Street, Marlow, Buckinghamshire.
(B) Between October 1978 and July 1982 the taxpayer and his wife rented a property being The Rectory, Tackley, Oxfordshire.
(C) From March 1981 the taxpayer worked for some four or five months for a company producing fixing products for concrete. Thereafter he...
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