Hatt v Newman (HM Inspector of Taxes)

JurisdictionEngland & Wales
Judgment Date20 January 2000
Date20 January 2000
CourtChancery Division

Chancery Division.

Jonathan Parker J.

Hatt
and
Newman (HM Inspector of Taxes)

The taxpayer appeared in person.

Christopher Tidmarsh (instructed by the Solicitor of Inland Revenue) for the Revenue.

The following case was referred to in the judgment:

Griffiths (HMIT) v Jackson TAXTAX[1983] BTC 68; 56 TC 583

Capital gains tax - Disposal of building - Contract conditional on grant of planning permission - Permission granted on 29 March 1995 and sale completed on 6 April 1995 - Taxpayer had used part of building for storage in connection with his business until 1990 and had let rooms to tenants - Whether disposal occurred in 1994-95 or 1995-96 - Whether eligible for retirement relief - Taxation of Chargeable Gains Act 1992 section 28 section 163 schedule 6Taxation of Chargeable Gains Act 1992, ss. 28, 163 and Sch. 6.

This was an appeal by the taxpayer against a decision of a special commissioner that capital gains tax for the year 1994-95 was correctly assessed on the taxpayer.

In 1999 the taxpayer was in his seventies. In the 1960s he and his wife had purchased a run-down building, the habitable parts of which were let furnished to various tenants. Other parts of the building were used by the taxpayer for his manure haulage business which was discontinued in 1990.

On 21 February 1995 Mr and Mrs Hatt contracted to sell the building. The contract was conditional on the purchaser obtaining planning permission for use as a single dwelling house which was granted on 29 March 1995. The sale was completed on 6 April 1995.

The taxpayer was assessed to tax on the disposal of the property for the year 1994-95 on the footing that the disposal took place on 29 March when planning permission was granted. Under the Taxation of Chargeable Gains Act 1992 section 28Taxation of Chargeable Gains Act 1992, s. 28, if a contract was conditional, the time at which the disposal took place was the time when the condition was satisfied.

The taxpayer contended that the assessment should be made for the year 1995-96, when completion took place. He also claimed that the building was an asset of his business activities of letting rooms and manure contracting, entitling him to claim retirement relief.

Held, dismissing the taxpayer's appeal:

1. The disposal took place in the year 1994-95 when the condition as to the grant of planning permission was fulfilled.

2. Even if the property could be regarded as an asset of his business, the taxpayer was not entitled to retirement relief since the haulage business had ceased more than four years before the disposal. The conditions for relief in Taxation of Chargeable Gains Act 1992 section 163s. 163 of and Taxation of Chargeable Gains Act 1992 schedule 6Sch. 6 to the 1992 Act required the business to have ceased not more than one year before retirement.

3. Furnished lettings, although a business activity, were not a trade and thus did not qualify for retirement relief: Griffiths (HMIT) v Jackson TAX[1983] BTC 68 followed.

APPEAL

By originating summons pursuant to the Taxes Management Act 1970 section 56ATaxes Management Act 1970, s. 56A (as substituted by SI 1994/1813SI 1994/1813 with effect from 1 September 1994), the taxpayer Mr Hatt, appealed to the High Court against the following decision of a special commissioner (Mr THK Everett), released on 27 May 1999.

DECISION

This appeal arises out of the disposal by Mr and Mrs Hatt in 1995 of a property known as 61 Fordbridge Road, Ashford, Middlesex.

The issues for consideration in principle are:

  1. (a) The inspector contends that the disposal of the property for capital gains tax purposes falls in the tax year 1994-95. Mr Hatt contends that the disposal for capital gains tax purposes falls in the tax year 1995-96.

  2. (b) Mr Hatt claims retirement relief on the disposal proceeds. The inspector contends that retirement relief is not due.

The value of the property as at 31 March 1992 has not been agreed between the parties and remains to be determined. That is an issue outside my jurisdiction, which will have to be referred to the lands tribunal.

Mr Hatt gave evidence before me. There was no agreement as to the documents and each party provided its own bundle.

The facts

Mr Hatt is now aged 75 years and Mrs Hatt is aged 84 years.

Mr Hatt formerly carried on business as a manure contractor and on his own evidence, that business ceased on 31 August 1990.

Mr and Mrs Hatt purchased 61 Fordbridge Road, Ashford, Middlesex on or about 6 June 1967. The property was in a very poor condition: the second floor was unusable. Its condition was so poor that Mr and Mrs Hatt were unable to obtain a mortgage on it. The purchase moneys were provided partly by Mr Hatt who produced some £2,000 which he says was money from his business, partly by a mortgage effected by Mrs Hatt on the matrimonial home, 105 Kenilworth Road, Ashford, Middlesex and as to the balance by a mortgage to the vendors. The mortgage to the vendors was repaid by 1975 by remittances from Mr Hatt to the vendors in Southern Ireland to which they had emigrated. Mr Hatt's evidence was to the effect that the moneys which he sent to Southern Ireland came from his business. He also gave evidence to the effect that he used the kitchen of 61 Fordbridge Road as a workshop for his business and also used part of the property for storage purposes.

Prior to the purchase of 61 Fordbridge Road by Mr and Mrs Hatt it had at some time been used as a nursing home. Mr and Mrs Hatt used the habitable parts of the property for letting to various individual tenants. The rental income produced was returned to the Inland Revenue as such and has been assessed as such to tax under Income and Corporation Taxes Act 1988Case VI of Sch. D under the heading "furnished lettings".

Late in 1994 Mr and Mrs Hatt decided to sell 61 Fordbridge Road and placed it in the hands of estate agents. Jayne Reddyhoff agreed to purchase it for £190,000 and contracts were exchanged for the sale on 21 February 1995. The completion date was stated to be 20 March 1995. In addition to various standard conditions the contract contained the following special conditions:

  1. 8. The Seller will permit the Buyer access from the date hereof to enable her to remove the separate power supplies to the individual rooms at the property and obtain confirmation from a qualified electrician that works have been carried out to this effect such works to be verified by the Buyer's mortgagees. The Buyer will make good at her own expense any damage to the wiring at the property if the Buyer fails to complete.

  2. 9. Completion is conditional upon Spelthorne Borough Council granting planning permission for the use of the property as a single private dwelling house. If the said...

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2 cases
  • Andrew & Shirley Smith v The Commissioners of Inland Revenue, SPC 00388
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 21 October 2003
    ...Section 27(2) applied to conditions which suspended contractual obligations. He illustrated this point by reference to Hatt v Newman 2000 72 TC 462. Clause 2(d) of the missives was not an option. Mr Robertson’s views were unsound. Clause 2(b) and (d) can be read consistently one with the ot......
  • Refson v HM Revenue and Customs
    • United Kingdom
    • Chancery Division
    • 18 June 2008
    ...Majesty's Revenue and Customs is well placed. 7 The relevant authorities include the decision of Jonathan Parker J (as he then was) in Hatt v Newman, unreported, where he says, at page 7 of the judgment: “In my judgment, if a case is to be made to the effect that an extra-statutory concessi......

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