Hall (Executors of Hall Decd) v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 18 February 1997 |
| Date | 18 February 1997 |
| Court | Special Commissioners (UK) |
special commissioners decision
Mr THK Everett and Mr DA Shirley.
Michael Johnson QC for the appellants.
Christopher Tidmarsh for the Crown.
Inheritance tax - Business property relief - Caravan Park - Deceased had received rents for caravan standings and chalets - Owner as lessor obliged to maintain facilities on site - Whether deceased carried on a trade or whether business consisted wholly or mainly of making or holding investments - The business was mainly receipt of rents and therefore investment - Business property relief not applicable -Inheritance Tax Act 1984Inheritance Tax Act 1984, s. 105(3).
"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": Inheritance Tax Act 1984 sections 104 and 105(1)(a). Section 105(3) excludes from the category of relevant business property, among other things, a business that consists wholly or mainly of holding investments. 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.
The executors of the will of Flora Clark Hall deceased ("Mrs Hall") appeal a determination dated 20 July 1995 of the Commissioners of Inland Revenue in respect of a transfer of value deemed to have been made on her death on 15 November 1993. The notice of determination provided that:
The business in which [Mrs Hall] used the property, The Caravan Park, Bryn Tanat, Llansantffraid, Powys consisted mainly of holding investments within the meaning of section 105(3) of the Inheritance Tax Act 1984.
The executors appeal. Their grounds of appeal were as follows:
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1. The business in which [Mrs Hall] used the property The Caravan Park, Bryn Tanat, Llansantffraid, Powys Wales did not consist wholly or mainly of holding investments within the meaning of section 105(3) of the Inheritance Tax Act 1984.
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2. The business had a commercial foundation independent of the mere provision of property for letting.
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3. A range of facilities was provided to customers of the business, of kinds equivalent to those identified by the learned Presiding Special Commissioner in paragraph 14 of his decision in Burkinyoung v IRC (released 1 March 1995).
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4. The activities of the business produced an income for [Mrs Hall] which was not part and parcel of the business of holding investments, as described by the learned Presiding Special Commissioner in paragraph 22 of his decision in Martin v IRC (released 1 March 1995).
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5. The interest of [Mrs Hall] in the business should accordingly be treated as "relevant business property" within the meaning of Chapter I of Part V of the Inheritance Tax Act 1984.
Prior to the hearing of this appeal the Respondents have accepted that the activities of Mrs Hall in relation to the property constituted a business. The Respondents have also accepted that Mrs Hall's business did not consist wholly of making or holding investments. The sole issue before us therefore is whether the business owned by Mrs Hall at her death consisted "mainly of making or holding investments".
The facts are drawn from the oral evidence of Mr Ian Hall, one of Mrs Hall's executors, and Mr Anthony Thomas Bywater, of Salop Caravans Ltd. In addition we had before us a bundle of documents, copies of the business accounts, some photographs of Tanat Caravan Park, a plan of the Caravan Park, a brochure of the Caravan Park and a brochure advertising Salop Caravans. The bundle of documents included proofs of two witness statements made by Mr Ian Hall.
Mrs Hall's business traded under the name "Tanat Caravan Park". The business commenced in or about the year 1967 and was run initially by Mr Ian Hall's parents and his uncle. His uncle retired from the business in 1972 and Mr Hall senior died in February 1989.
Originally the business involved not only the Caravan Park but included a hotel, but that was disposed of in or about the year 1987.
Mrs Hall became sole owner of the business on the death of her husband in 1989 but took her son Ian into partnership on 1 November 1990. A copy of the partnership deed is to be found in the bundle.
Tanat Caravan Park totals 18 acres in area beside the river Tanat. At the relevant time there were almost 100 caravans on the site covering an area of some 9 acres. In addition there were 11 wooden chalets occupying an area near the river of approximately 1 acre.
The chalets are each let on leases for 45 years. The oldest lease expires in the year 2013.
Chalet tenants pay an annual rent, reviewable at 5 yearly intervals.
Mr Hall gave evidence that chalet tenants had access to their chalets for only fifty weeks in each year but no such restriction appears in the copy lease provided in the bundle. The lessors' obligations in relation to the chalets consisted in keeping the site clean and tidy, and maintaining in good order and repair the roads, car parks, hard standings and footpaths and the means of supplying each chalet with water, electricity and drainage.
The caravans were static caravans, not touring caravans. They were owned by their respective tenants and not by Tanat Caravan Park. Each caravan was let at a rent for the season covering the period 1 March to 31 October in each year. Caravan owners were not permitted to occupy their caravan during the winter, during which time a small standing charge was levied. Access during the winter was permitted during the day time but overnight stays were not allowed.
At the relevant time the administration of the business was carried out by Mrs Hall whilst the physical work was performed by her son. It appears to have been a genuine family business with no other employees.
The site licence granted by the local authority contains conditions for the operation of the Caravan Park and provides that the following facilities shall be supplied by the operator:
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(a) a telephone on site
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(b) toilets and showers for caravan pitches and caravans without these facilities
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(c) hard standings for the caravans
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(d) hard core roads around the park
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(e) electricity supplies conforming with the latest electrical regulations
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(f) clean drinking water
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(g) fire fighting equipment
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(h) space for children's games and/or other recreational purposes
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(i) arrangements for refuse disposal
The caravan tenants, that is, the caravan owners were not permitted to buy and/or sell their caravans except through the agency of Tanat Caravan Park. We accept the evidence of Mr Hall in relation to purchases and sales, which appears at page 41 of the bundle as follows:
Every customer is aware that if they want to sell their caravan the sale has to go through me. I agree a selling price and then find a buyer for the...
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