Marson (HM Inspector of Taxes) v Marriage
| Jurisdiction | England & Wales |
| Judgment Date | 21 December 1979 |
| Date | 21 December 1979 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Capital gains tax - Sale of land before 6 April 1965 - Further payment 5 April 1976 - Whether second payment chargeable to tax - Whether second payment was satisfaction of a debt - Finance Act 1965, ss 19-22, Sch 6, para 14(5) and Sch 7, para 11.
The taxpayer agreed to sell some 47 acres of land to a development company on 31 March 1965 for some £47,000. Vacant possession was to be given on completion and the company was then to grant the taxpayer (by a partnership known as W. and H. Marriage - Sons) a licence to continue to farm the land without payment until it was required for development. By a supplemental agreement of the same date (referred to in the first agreement) the company agreed to pay the taxpayer £7,500 for each acre of land it was permitted to develop at eight units per acre within 21 years of the agreement (proportionately if lesser density was permitted). There was a charge registered in respect of this liability. If there was no planning permission by the end of 21 years the taxpayer had an option to repurchase at current market value. By clause 9 of the supplemental agreement, if the land was nationalised or compulsorily acquired the company had to pay the taxpayer one half of the amounts it received and that was to be the full extent of the company's liability.
In August 1975 the licence was terminated. Outline and conditional planning consents were granted as to part of the land on 21 November 1975 and as to the remainder on 3 March 1976. On 26 January 1976 there was agreement between the taxpayer and the company that whatever the planning permission outcome the charge on the land would be released on payment of £348,250. On 5 April 1976 this was paid. The Special Commissioners, allowing the taxpayer's appeal, discharged an assessment to capital gains tax for 1975-76. The Crown appealed.
The Chancery Division, allowing the Crown's appeal, held that: (1) Finance Act 1965, Sch 6, para 14(5), had no application because in 1965 the further amount payable was unascertainable; (2) when, in 1976, Finance Act 1965, s 22(3), operated to produce a disposal of the incorporeal rights, capital gains tax was chargeable on £348,250 less the value of any relevant rights on 31 March 1965.
Stated under the Taxes Management Act 1970, s 56, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 4, 5, and 8 May 1978, Mr. Henry Perry Marriage (hereinafter called "Mr. Marriage") appealed against an assessment to capital gains tax in the sum of £250,000 for the year 1975-76.
2. Shortly stated the question for our decision was whether the whole or any part of a sum of £348,250 received by Mr. Marriage on 5 April 1976 from Gough Cooper - Co. Ltd. (hereinafter called "Gough Cooper") in the circumstances set out below, was subject to capital gains tax.
3. Evidence before us was given by Mr T.C. Gepp, senior partner in the firm of Gepp - Sons, solicitors of Chelmsford, who acted for Mr. Marriage in the transactions relevant to this appeal.
4. The following documents were proved or admitted before us:
Date |
Description |
Parties |
1 23 May 1921 |
Marriage settlement |
Llewellyn Marriage, Norah Elizabeth Warner and others |
2 27 March 1960 |
Grant of probate of the will of Llewellyn Marriage decd. |
|
3 29 March 1965 |
Deed of release |
Mrs. N.E. Marriage and Mr. Marriage |
4 31 March 1965 |
Agreement for the sale of land |
Mrs. N.E. Marriage and others and Mr. Marriage and another to Gough Cooper |
5 |
National Conditions of Sale, 17th edn |
|
6 31 March 1965 |
Supplemental agreement |
Mrs. N.E. Marriage and others and Gough Cooper |
7 31 March 1965 |
Conveyance |
Mrs. N.E. Marriage and others to Gough Cooper |
8 31 March 1965 |
Conveyance |
Mr. Marriage and another to Gough Cooper |
9 2 April 1965 |
Application for registration of land charges and acknowledgement of receipt |
|
10 23 April 1965 |
Certificate of registration of a mortgage or charge at the Companies Registry |
|
11 |
Plan showing areas of CHR/1589/73 and CHB/721/73 |
|
12 |
North Melbourne Planning Brief |
13 28 May 1975 |
Notice terminating licence to occupy land at Chelmsford |
Messrs. Argles & Court to Mr. Marriage |
14 2 September 1975 |
Minutes of Planning Committee of Chelmsford District Council |
|
15 |
Gough Cooper master plan 4810/1 |
|
16 21 November 1975 |
Agreement under s 52, Town & Country Planning Act 1971 |
Gough Cooper and Chelmsford District Council |
17 21 November 1975 |
Planning consent for application CHR/1589/73 |
|
18 28 May, 1975 to 26 January 1976 |
Bundle of correspondence |
|
19 3 March 1976 |
Planning consent for application CHB/721/73 and approval to reserved matters |
|
20 5 April 1976 |
H.M. Land Registry Form 53 release of charge and of option to repurchase land at Chelmsford. |
Copies of documents 4, 6, 7 and 8, marked as exhibits A to D respectively, are attached to and form part of this case(1). Copies of the other documents listed above are available for inspection by the Court if required.
5. From the evidence both oral and documentary adduced before us we find the following facts proved or admitted:
(i) On 31 March 1965 Mr. Marriage was the beneficial owner of an area of farmland near Chelmsford in Essex of which 47.04 acres are the subject-matter of the transactions involved in this appeal. His interest in 37.96 of those acres ("the first land") was derived from a testamentary power of appointment which had been exercised in his favour by his father, Llewellyn Marriage, on his death in 1960. The legal title to this land was still vested in his father's personal representatives. His interest in the remaining 9.08 acres ("the second land") was derived from the provisions of his parents' marriage settlement dated 23 May 1921 and a deed of release whereby, on 29 March 1965, his mother had surrendered her life interest in one of the funds of that settlement to the intent that Mr. Marriage should hold that fund as absolute beneficial owner. The legal title to the second land was held by the trustees of the 1921 settlement.
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(ii) Mr. Marriage had reason to believe that, in the course of a scheme for large-scale residential development which was expected to be carried out in that part of Essex before long, planning permission might be obtainable for the development of all or some of the 47.04 acres in question. He had accordingly discussed with Gough Cooper, a development company, the terms on which that land should be made available to them for the purposes of development.
(iii) As a result of those discussions two agreements were signed on 31 March 1965 between the personal representatives of Llewellyn Marriage decd. (as owners of the first land) and the trustees of the 1921 settlement (as owners of the second land) on one side and Gough Cooper on the other side. By the first, or "principal", agreement, exhibit A, the landowners agreed to sell the land to Gough Cooper ("the purchaser") for a consideration amounting in all to £47,040 (clauses 1 and 2): vacant possession was to be given on completion and the purchaser would then grant the vendors, by a partnership known as W. and H. Marriage - Sons, a licence to continue to farm the land without payment until it was required for development, at which point the licence could be determined by three months' notice (clause 4). In addition, by clause 6, the purchaser agreed to enter into an agreement with each of the vendors, in respect of the appropriate part of the land, on terms already agreed between the parties.
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(iv) Those agreed terms were embodied in the supplemental agreement of the same date, exhibit B, in which the vendors under the principal agreement were described as "the owners" and the purchaser under the principal agreement was described as "the company". The main provisions of the supplemental agreement were that:
(a) the company would pay the owners £7,500 in respect of each acre of the land which it should be permitted to develop at a density of not less than eight units to the acre within a period of 21 years from the date of the agreement: such payments to abate proportionately if the permitted density should be less than eight units to the acre (clauses 1 and 2);
(b) the company charged the land with the liability to make the payments provided for in the agreement and agreed that the charge should be protected by registration at the Land Registry, subject to an undertaking by the owners to give a certificate of discharge for any land in respect of which the appropriate payment had been made (clause 7);
(c) if, in respect of any part of the land, no planning permission should have been received by the end of 21 years the owners should have the option to repurchase that part of the land, at the market price then current, by giving written notice within six months of the end of the 21-year period (clause 10);
(d) if the said option had not been exercised within the six months it should lapse and the company would thereupon be free to dispose of the land as it thought fit (clause 10(b)).
(v) On the same day, 31 March 1965, the first vendors conveyed the first land and the second vendors conveyed the second land to the purchaser for the consideration specified in the principal agreement, exhibit A. Each of the deeds (exhibits C and D respectively) was expressed to convey the fee simple in the land free from incumbrances, subject only, in the case of the first land, to certain exceptions, reservations, covenants and stipulations which are not relevant to this appeal.
(vi) In February 1975 the Chelmsford District Council (hereinafter referred to as "the Council"), in its capacity as the local planning authority, published a document entitled North Melbourne Planning Brief. The introduction to this document explained that the Secretary of State for...
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