Green v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 12 February 1982 |
| Date | 12 February 1982 |
| Court | Court of Session (Inner House) |
Inner House, Court of Session.
Mr. G.W. Penrose Q.C. (instructed by Alex Morison & Co. W.S.) for the taxpayer.
Mrs. Ann Paton (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: The Lord President (Lord Emslie), Lord Cameron and Lord Stott.
Capital gains tax - Private residence relief - Mansion house with adjoining wings - Whether on disposal of the property the relief applies to the house alone - Extent of relief - Finance Act 1965 section 29 subsec-or-para (1) section 29 subsec-or-para (2)Finance Act 1965 - sec. 29(1), (2), (6).
The taxpayer, G, was the owner of property consisting of a main house with two wings and grounds of 15 acres.
Early in 1971, G had, in association with F, contracted to buy the property. They intended that the main house be divided to provide separate residences for their respective households. Entry was obtained in May 1971. Later, G bought F's interest in the property and title was granted in G's favour in May 1972.
The property was in a dilapidated condition when G and F had bought it. For the first two or three months during works of alteration and redecoration, G and his family lived in two caravans in the grounds. The four members of G's household moved into the house during the latter half of 1971; but G did not move into the house until near the end of 1971.
The main house consisted of 33 rooms. Each wing had two floors, containing both living accommodation and storage space. Each wing had its own entrance with connecting passages with the main house at basement level. A flat prepared for F in the East wing was, after his departure, occupied by a gardener/handyman and his family.
The District Valuer visited the property in January 1973 and reported that only four rooms and a kitchen were in "apparent" use and that no room was used for any purpose other than residential occupation.
In May 1975, G found himself in financial difficulties and sold the property. He was assessed to capital gains tax on the full amount of the gain. He appealed to the General Commissioners against the assessment, claiming private residence relief under Finance Act 1965,Finance Act 1965 section 29sec. 29 (similar provisions are now contained in Capital Gains Tax Act 1979, Capital Gains Tax Act 1979 section 101sec. 101-Capital Gains Tax Act 1979 section 105105).
The General Commissioners determined that G was entitled to relief for the main house but that the relief should be adjusted under Finance Act 1965, Finance Act 1965 section 29 subsec-or-para (6)sec. 29(6) (now Capital Gains Tax Act 1979, Capital Gains Tax Act 1979 section 103 subsec-or-para (2)sec. 103(2) by reason of there having been a change in what was occupied as G's residence "whether on account of a reconstruction or conversion of a building or for any other reason". They also determined that private residence relief did not extend to the two wings of the main house. G appealed to the Court of Session.
Held, appeal allowed in part.
1. On the facts of the case, the General Commissioners were not entitled to adjust the relief under Finance Act 1965, Finance Act 1965 section 29 subsec-or-para (6)sec. 29(6). This was not a case where only part of the main house fell to be treated as G's residence. There was no factual material before the General Commissioners to entitle them to proceed to make the adjustment. In particular, there was no finding that there was any change in the rooms normally used for ordinary family living or that reconstruction or redecoration in any way affected the family's occupation thereof. Consequently, G's gain on the disposal of the main house and grounds was in its entirety a non-chargeable gain.
2. The question of whether the two wings of the house were part of G's residence was for the General Commissioners to answer. The decision of the Commissioners was not one which could not have been taken by a reasonable body of Commissioners, properly directed. G's appeal in relation to the wings of the house must, therefore, fail.
The Lord President (Lord Emslie): The appellant was the owner of subjects known as Melville House from and after February 1972 and, with his family, lived in the main mansion house. He had no other residences. In May 1975 he found himself in some financial difficulties. He then sold the whole subjects to Fife County Council and thereafter was assessed to Capital Gains Tax on the whole gain on the disposal. Not surprisingly he appealed to the General Commissioners against this assessment upon the ground that he was entitled to exemption from that tax in terms of Finance Act 1965 section 29 subsec-or-para (1) section 29 subsec-or-para (2)sec. 29(1) and (2) of theFinance Act 1965. For the purpose of this appeal the following provisions of Finance Act 1965 section 29sec. 29 were of possible relevance-
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29(1) This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in-
(a) a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, his only or main residence, or
(b) land which he has for his own occupation and enjoyment with that residence as its garden or grounds up to an area (inclusive of the site of the dwelling-house) of one acre or such larger area as the Commissioners concerned may in any particular case determine, on being satisfied that, regard being had to the size and character of the dwelling-house, the larger area is required for the reasonable enjoyment of it (or of the part in question) as a residence ....
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29(2) The gain shall not be a chargeable gain if the dwelling-house or part of a dwelling-house has been the individual's only or main residence throughout the period of ownership, or throughout the period of ownership except for all or any part of the last twelve months of that period.
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29(5) If the gain accrues from the disposal of a dwelling-house or part of a dwelling-house part of which is used exclusively for the purposes of a trade or business or of a profession or vocation, the gain shall be apportioned and the foregoing sub-sections shall apply in relation to the part of the gain apportioned to the part which is not exclusively used for those purposes.
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29(6) If at any time in the period of ownership there is a change in what is occupied as the individual's residence, whether on account of a reconstruction or conversion of a building or for any other reason …
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29(11) This section shall not apply in relation to a gain...
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