Mansell v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 03 July 2006 |
| Date | 03 July 2006 |
| Court | Special Commissioners (UK) |
special commissioners decision
Charles Hellier
Keith Gordon of Squire, Sanders & Dempsey for the Appellant
David Ewart instructing by the Acting Solicitor instructed for HM Revenue and Customs for the Respondents
Date trade commenced - trade set up and commenced - section 218 FA 94 - whether trade had commenced at a time when heads of terms for a purchase had been agreed
1. During late 1992 and 1993 the Appellant invested significant time and energy in becoming an expert on the development of motorway service stations. He investigated a number of possible sites. In late 1993 he identified a possible site for such a station at Tipshelf near Bolsover. He had detailed discussions with the local landowners. On 23 January 1994 detailed heads of terms for options over the relevant land were agreed. On 15 April 1994 contracts were signed reflecting those heads of terms.
2. Between December 1994 and February 1997 he turned his rights to account and received in total some £300,000 for his hard work.
3. There is no dispute that Mr Mansell made his profits from a trade (although there is some argument about what this trade was). The question in this appeal is when that trade was "set up and commenced". The importance of that issue lies in section 218 Finance Act 1994.
4. Finance Act 1994 section 200Sections 200 to 218 FA 1994 amended the basis on which the trading profits of an individual were assessed. Thitherto the tax charge for a fiscal year ending on 5 April had generally been based on the profits of the trade earned in the accounting year ending in the preceding fiscal year. Sections 200-217 replaced that regime and based the tax change for a fiscal year on the profits of the accounting year ending in that fiscal year. There were transitional provisions.
5. Finance Act 1994 section 218 subsec-or-para 1Section 218(1) provides that the Chapter containing these provisions:
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(a) except in its application to a trade set up and commenced on or after 6 April 1994 … has effect as respects the year 1996 - 97 and subsequent years of assessment, and
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(b) in its application to a trade so set up and commenced … has effect in respect the year 1994-1995 and subsequent years of assessment.
6. Broadly, as a result of that section; if Mr Mansell's trade was set up and commenced before 6 April 1994 he is taxed more favourably than if it was set up and commenced on or after that date.
7. So the question is: when was Mr Mansell's trade "set up and commenced"?
8. The Respondents say that his trade cannot have commenced before the contract was signed on 15 April 1994. The Appellant says that his trade was set up and commenced on or before 6 April 1994.
9. I am asked to give a decision in principle on this issue. I am told that there is no dispute over the figures.
10. Accordingly, in accordance with Regulation 18(5) of the Special commissioners (Jurisdiction and Procedure) Regulations 1994 this appeal will be adjourned until such further questions arising from this decision have been agreed by the parties or failing agreement decided by the Tribunal on restoration of the hearing.
11. Mr Mansell provided a witness statement and gave extensive oral evidence. There was a statement of Agreed Facts. I had before me a bundle of documents which included the copies of the documents I refer to below. I was also given copies of adverts from the Estates Gazette. From that evidence I find the following.
12. In 1992 Mr Mansell became interested in becoming the lessee or franchisee of a trunk road petrol station. His interest was in developing a catering facility on site. His interest led him into discussion with the major oil companies and to attending seminars. Initially his plan was to take on a franchise at a station but after discussions with those he met he began instead to consider the possibility of owning a station outright.
13. As he was pursuing this idea, he became aware of a heightened interest in motorway service areas (MSAs) among those he met and spoke to. The first MSA had been built in 1960 and the bulk of then extant of MSAs had been completed soon thereafter. These were owned by the state and operated by a small number of companies; Trust House Forte, Granada and others. There had been public concern about the level of service these establishments offered. After the Conservative government came to power the Department of Transport announced, in August 1992, that there would be greater private sector involvement in, and less central regulation of, MSA facilities. In particular, responsibility for identifying new motorway service area sites, seeking planning permission, acquiring the land and developing the sites was to pass to the private sector.
14. As a result, as 1992 went by, Mr Mansell became interested in promoting the possibility of additional MSAs or introducing such possibilities to third parties. Having started by looking at the development of sites on trunk roads for Little Chef type facilities and petrol facilities, he became one of a number of people who were considering new sites for MSAs.
15. During part of 1992 and throughout 1993 made himself aware of the constraints which applied to the development of MSAs: these included the Department of Transport requirements as to the minimum distance between MSAs, the geography of the necessary motorway exit and ingress roads (curvature, weaving distances, signage), and the layout of the MSA; the planning constraints, and the statistics for current and projected traffic volumes. These constraints were different from, and generally more onerous than, those affecting normal commercial developments.
16. In 1993 he continued his research on possible sites. His initial interest was with the M25 which, at that time, had no MSAs. Quite soon however he realised that his best chances of success lay elsewhere: those involved at the major oil companies were concentrating their attention on the M25, large stretches of land bordering the M25 were already under option to other organisations, and it was an area away from where he lived and of which he had little local knowledge. He realised that the number of people across the country working on potential MSA sites was quite small - probably less than 5 (with the larger oil companies), and that his best chance of success was away from their main area of interest. The attention on the M25 had given rise to a number of proposals but by the end of 1993 only one proposal had been successful.
17. During the latter half of 1993 Mr Mansell did extensive research in the Midlands. He had lived in Derbyshire for 30 years or more; the M1 and M6 were half an hour from his home. He identified alternative sites at Norton Farm and North Pie Hill Farm. The local authority offices were 30 minutes from his home: he spent a week or 10 days researching the Local Authority files: looking at environmental assessments, highway submissions and planning issues.
18. These researches however came to nought. In this period he also spent a week in Chester reviewing the submissions for an MSA at Hapsford. He looked at the possibilities further north towards the Lake District and identified an area on the M1 with higher traffic flow near Castle Donnington on which he focussed. He visited the farms in the area adjoining the motorway to identify the landowners. But he came to the conclusion that this area had numerous problems including a proposal to widen the motorway.
19. He then came to concentrate on the Bolsover area. The area had been a coal mining area. That industry had substantially disappeared. There was unemployment in the area. He discovered that the Local Authority were keen to promote projects which would give rise to new employment. A MSA would provide 300 jobs. He met and received encouragement from the local authority.
20. He had found that when the motorway had been built provision had been made for an MSA at Tipshelf. Access lanes had been provided for. He approached the Highways Agency who owned the site. But the Agency said it would not dispose of it because the land was wanted for road widening. He contemplated acquiring additional land to add to what would be left of the site after the road widening but still the Agency said no.
21. So he looked for a new site in the same area. He knocked on the doors of the local farmers: getting to know who owned the land and whether they would be disposed to sell. Just before Christmas 1993 he met Mr John Ball who farmed land on the side of the motorway and close to the Tipshelf site.
22. Mr Mansell had a number of meetings with Mr Ball in December 1993 about the use of part of his land. Mr Mansell's researches however revealed that an insufficient part of Mr Ball's farm was suitable and that additional adjoining land was needed for a site which would meet the Highways Agency's requirements. The neighbouring farmer was Mr Franklin, Mr Ball's cousin. Mr Mansell had a meeting with Mr Franklin and Mr Ball in early January 1994. Over the period from late 1993 to 22 January 1994 Mr Mansell had 9 or 10 meetings with Mr Ball, or Mr Ball and others to discuss the proposal.
23. Mr Ball and Mrs Franklin (for Mrs Franklin was the owner of the farm) appointed Mr John Copeland to act for them in the negotiations. Mr Copeland was a surveyor from a firm in Chesterfield who had previously acted for a number of local farmers when the M1 was first built. A number of meetings took place between Mr Mansell, Mr Copeland, Mr Ball and Mr and Mrs Franklin in January 1994. The final points of the deal were agreed on 23 January 1994, following which heads of terms of agreement were drawn up by Mr Copeland and made available to the parties respective solicitors.
24. On 15 April 1994 option agreements were signed between Texas Oil Company and Mr Ball, and between Texas Oil...
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