Honour (Inspector of Taxes) v Norris
| Jurisdiction | England & Wales |
| Judgment Date | 04 March 1992 |
| Date | 04 March 1992 |
| Court | Chancery Division |
Chancery Division.
Vinelott J.
Nicholas Warren (instructed by the Solicitor of Inland Revenue) for the Crown.
The taxpayer appeared in person.
The following cases were referred to in the judgment:
Batey (HMIT) v Wakefield TAX(1981) 55 TC 550
Green v IR Commrs TAXTAX(1982) 56 TC 10; [1982] BTC 378
Langford Property Co Ltd v Goldrich ELR[1949] 1 KB 511
Lewis (HMIT) v Lady Rook TAXTAX[1990] BTC 9; [1992] BTC 102 (CA)
Markey (HMIT) v Sanders TAXTAX(1987) 60 TC 245; [1987] BTC 176
Methuen-Campbell v Walters ELR[1979] QB 525
Williams (HMIT) v Merrylees TAXTAX(1987) 60 TC 297; [1987] BTC 393
Capital gains tax - Private residence exemption - Taxpayer with his family occupied several flats in different parts of London Square - Whether disposal of one of the flats qualified for exemption -Capital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, sec. 101.
This was an appeal by the Revenue from a decision of the general commissioners for Kensington that one of four flats in different buildings in a London square, all occupied by the taxpayer and his family, could be regarded as part of a single dwelling-house for the purposes of exemption from tax under the Capital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, sec. 101.
The taxpayer and his wife had leases of four separate flats in Ovington Square, Kensington, which he and his family occupied. One of the leases was acquired by the taxpayer's wife before their marriage while the others were acquired later as the need for accommodation arose. In May 1987 the taxpayer's wife sold one of the flats ("flat 10").
Ovington Square consisted of some 32 houses, mostly converted to flats, and a modern block of flats of which flat 10 was one. There was a central garden available for use by the residents. The flats occupied by the taxpayer's family were in different parts of the square. In particular, flat 10 was at least 80 yards from one of them and 60 yards from another.
The general commissioners concluded that flat 10 and the other flats in Ovington Square occupied by the taxpayer and his family constituted one dwelling-house which was his only or main residence and accordingly the exemption applied on its disposal.
The Revenue appealed to the High Court contending that the commissioners' conclusion was not supported by the facts. It was not enough for the taxpayer to establish that two or more separate flats were used together. It was necessary to look at all the circumstances including whether the flats were leased at the same time and whether they were sufficiently near to each other to be capable of being regarded as a single dwelling-house.
The taxpayer contended that it was established that separate buildings might constitute a single dwelling. It followed that a garage or storage space separate from a flat, or two flats in a building, either adjacent or above each other whether or not connected, could be regarded as parts of a single dwelling-house and it did not matter if the flats were further apart if they were occupied as a single unit.
Held, allowing the Revenue's appeal:
The flats in Ovington Square could not sensibly be described as a single dwelling-house split into different buildings and performing different but related functions. The commissioners' findings of fact were inconsistent with their conclusion and the Revenue's appeal would be allowed.
1. At a meeting of the commissioners for the general purposes of income tax for the division of Kensington held on the 24 January 1990 William Vernon Wentworth Norris ("the taxpayer") appealed against an assessment made on him in respect of capital gains for the year 1987-88 in the amount of £40,000.
2. Shortly stated, the question for our determination was whether flat 10 at 22-26 Ovington Square London SW3 1LH (known as flat 10) with other flats in Ovington Square constituted a dwelling-house which was the taxpayer's only or main residence for capital gains tax purposes within the meaning of Capital Gains Tax Act 1979 section 101 subsec-or-para (1)sec. 101(1)(a) of the Capital Gains Tax Act 1979.
3. The taxpayer, who appeared before us in person was assisted by Mr Richard W C Turnor of Messrs Allen & Overy (solicitors). The inspector was represented by Mr W G Child an inspector of taxes from Charing Cross District.
4. [Paragraph 4 listed the witnesses who gave evidence.]
5. [Paragraph 5 listed the documents proved or admitted.]
6. As a result of the evidence, both oral and documentary, adduced before us, we find the following facts proved or admitted:
(2) In June 1979, the taxpayer's wife (then Catherine Knowles) acquired a long leasehold interest in the basement flat at 21 Ovington Square London SW3 1LH (known as 21a). The premises consisted of one single bedroom, one double bedroom, one living room, one kitchen and one bathroom.
(3) In May 1982, the taxpayer and Catherine Knowles were married.
(4) Prior to October 1980 the taxpayer's wife then Catherine Knowles lived at flat 21a on her own.
(5) The taxpayer separated from his first wife in or about February 1980. The taxpayer had two children by his first marriage, both of whom gave evidence before us, namely Sally Jane Norris born on 14 May 1962 and William Richard James Norris born on 8 April 1965.
(6) In June 1982 a child, Katie, was born of the marriage between the taxpayer and Catherine Jean Norris.
(7) In July 1982, the taxpayer acquired a long leasehold interest in the basement at 2/4 Ovington Square London SW3 (known as flat 4a). This consisted of one single bedroom, one double bedroom, one living room, one kitchen and one bathroom.
(8) In July 1982 a Wendy Hodgson was employed to look after Katie.
(9) In September 1982, Catherine Evelyn Maingot (who was the taxpayer's wife's mother) acquired a long leasehold interest in a fourth floor flat at 22/26 Ovington Square London SW3 (known as flat 10). This consisted of one single bedroom, one double bedroom, one living room, one kitchen and one bathroom.
(10) Mrs Maingot died on 25 January 1983. The taxpayer's wife was the sole beneficiary of the will. The will was amended by the deed of family arrangement dated 8 May 1983 to give her a pecuniary legacy. In January 1984, flat 10 was appropriated to her towards the pecuniary legacy.
(11) In April 1985, the taxpayer's wife acquired the long leasehold interest in the basement flat at 19 Ovington Square London SW3 (known as flat 19a). Constructional work opened connections between flats 19a and 21a creating a new single unit comprising two bedrooms, a study, a living room, a play room, a dining room, a kitchen and two bathrooms.
(12) In May 1987, the taxpayer's wife sold flat 10 and acquired a long leasehold interest in the first floor flat at 21 Ovington Square London SW3 (known as flat 21c). This consisted of one bedroom, one living room, one kitchen and a bathroom.
(13) Ovington Square, London SW3 ignoring the narrow entrance road at the North and South ends has a length of approximately 73 yards and a width of approximately 30 yards when measured from and to the fronts of the houses abutting it on either side. Including houses and gardens, the width of the entire square becomes about 70 yards so that the whole area is about 1.05 acres of which, about 0.6 acres are occupied by the houses and their own gardens.
(14) The centre of Ovington Square comprises a fenced garden, approximately 60 yards long and 22 yards wide to which the public have no access but which is available to residents of the square and is managed by a committee appointed by those residents.
(15) There are 32 houses (counting the modern apartment block at numbers 22-26 as two houses) in Ovington Square. This again ignores the narrow entrance roads at the North and South ends. A few are used as complete houses, but most have six flats in each. Taking an average of five flats per house, there are about 160 flats occupying about 0.6 of an acre.
(16) Flat 21a is approximately 95 yards by road from flat 4a and approximately 80 yards by road from flat 10 and that flat 10 is approximately 60 yards from flat 4a.
(17) Flat 21a before being united with flat 19a had a floor area of about 500 square feet and flat 4 had approximately 700 square feet. Flat 10 had approximately 800 square feet. Flat 19a was the same size as flat 21a.
(18) Prior to 1980 the taxpayer and his two elder children were used to occupying spacious accommodation in the country. After separating from his first wife, but before moving to 21a the taxpayer had already established a pattern of accommodating his elder children in separate flats near to where he lived in London and intended to form part of his...
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