Marson v Morton
| Jurisdiction | England & Wales |
| Judgment Date | 31 July 1986 |
| Date | 31 July 1986 |
| Court | Chancery Division |
Revenue - Income tax - Profits of trade (Schedule D) - Purchase and sale of land - Isolated transaction - No intention to use or derive income from land - General commissioners' finding that transaction not amounting to trading - Whether commissioners' decision unreasonable -
In June 1977 the taxpayers, who were brothers, having taken advice from an estate agent, purchased an area of land with the benefit of planning permission for £65000. £35000 of that purchase price was provided by the taxpayers and the balance was borrowed at a commercial rate of interest. One of the taxpayers subsequently said in evidence that their intentions in making the purchase was to acquire an investment and that they had no intention of using the land, developing the land, or of receiving income from it. None of the taxpayers had ever before invested in land. In September 1977, again acting on the advice of the estate agent, the taxpayers sold the land for £100000. They were each assessed to income tax under Case I of Schedule D. in respect of the profits arising on that transaction. Their appeal against the assessments were upheld by the general commissioners who found that the transaction was far removed from the normal trading activities of the taxpayers and did not amount to an adventure in the nature of trade and was accordingly not within the charge to Case I of Schedule D. income tax under section 108 of the Income and Corporation Taxes Act 1970.F1
On appeal by the Crown:—
Held, dismissing the appeal, that the question of whether a transaction constituted an adventure in the nature of trade depended on the particular facts and circumstances of the case; that common sense guidance in reaching a conclusion was to be found from the decided authorities from which certain factors could be identified as being compatible with trading; but that, on the unusual facts, it could not be said that the commissioners' decision was contrary to the only proper conclusion nor that they had misdirected themselves as to the law and accordingly their decision that the transaction was not trading by the taxpayers could not be interfered with (post, pp. 1348A–C, 1350D–E, G–H, 1351D, F–H).
Per curiam. In 1986 it is not any longer self-evident that unless land is producing income it cannot be an investment. Since the arrival of inflation and high rates of tax on income new approaches to investment have emerged putting the emphasis in investment on the making of capital profit at the expense of income yield (post, p. 1350B–C).
The following cases are referred to in the judgment:
Edwards v. Bairstow [
Inland Revenue Commissioners v. Fraser,
Inland Revenue Commissioners v. Reinhold,
Johnston v. Heath [
Leeming v. Jones [
Rutledge v. Inland Revenue Commissioners,
The following additional cases were cited in argument:
Cooper v. C. & J. Clark Ltd. (
Emanuel (Lewis) & Son Ltd. v. White (
Iswera v. Inland Revenue Commissioners [
Jenkinson v. Freedland (
Purchase v. Tesco Stores Ltd. [
Simmons (as liquidator of Lionel Simmons Properties Ltd.) v. Inland Revenue Commissioners [
Taylor v. Good [
Turner v. Last (
Wisdom v. Chamberlain [
CASE STATED by the Commissioners for the General Purposes of Income Tax for the Division of Witham.
At a meeting of the commissioners on 17 January 1985 the taxpayers, Brian Robert Morton, Kenneth Edwin Morton, Franklyn Lawrence Morton and Dennis Joseph Morton, appealed against assessments to income tax made under Case I of Schedule D. in respect of a dealing in land. The taxpayers and the inspector of taxes agreed that there should be a joint hearing. The assessments were for the year 1977–78 in the sum of £7345 in each case. The question for the commissioners' determination was whether the purchase and sale of land forming part of the Hadley Estate by the taxpayers was an adventure in the nature of trade the profits from which were assessable under Case I of Schedule D. The commissioners determined the case in favour of the taxpayers. The Crown appealed.
The facts are stated in the judgment.
Alan Moses for the Crown.
Christopher Sokol for the taxpayers.
SIR NICOLAS BROWNE-WILKINSON V.-C. These are four appeals by way of case stated from the decision of general commissioners for the division of Witham in the county of Essex. The commissioners discharged assessments on each of the four taxpayers for income tax under Case I of Schedule D. for the year ending 1978, in the sum of £7345. The assessments related to each taxpayer's share of the profits arising from a transaction involving the purchase and sale of certain land. The question which the commissioners had to determine was whether the profit arising from that transaction was income received by the taxpayers in respect of any trade within the meaning of that word in Case I of Schedule D. Section 526 of the
The facts are fully set out in the case and I will only seek to summarise them to the extent it is necessary to explain my decision. The exact nature of the transaction is far from clear. It appears that there was a company, Kayworth Property Development Ltd., which had the benefit of a contract to buy certain land at a price of £65000; that land had the benefit of planning permission. The director and the majority shareholder in Kayworth was a Mr. Lucas, who was himself an estate agent and land developer. Mr. Lucas arranged that the taxpayers should take the benefit of that contract from Kayworth at nil consideration. In June 1977 the taxpayers, pursuant to that contract, purchased the land which was part of the Hadley Estate for £65000. The purchase price was financed in part by a loan of £30000 from a Colonel Austin, such loan bearing interest at the rate of 17 per cent. per annum. It is not clear to whom that loan was made. The balance of £35000 was raised by the taxpayers from personal resources. The case says: “from the personal resources of the [taxpayers] including their loan accounts with Warrell Morton & Co. Ltd.” On 15 September 1977 the land was resold by the taxpayers for £100000 to a company called Firstore Ltd. Firstore was again a company in which Mr. Lucas was a director and had an equal shareholding. Firstore had only been incorporated on 11 August 1977.
The four taxpayers are brothers and they are equal shareholders in Warrell Morton & Co...
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