Pepper (Inspector of Taxes) v Daffurn
| Jurisdiction | England & Wales |
| Judgment Date | 17 June 1993 |
| Date | 17 June 1993 |
| Court | Chancery Division |
Chancery Division.
Jonathan Parker J.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Alan James (instructed by Cox & Hodgetts, Evesham) for the taxpayer.
The following cases were referred to in the judgment:
Atkinson (HMIT) v Dancer; Mannion (HMIT) v Johnston TAXTAX(1988) 61 TC 598; [1988] BTC 364
Cooper (HMIT) v Stubbs TAX(1925) 10 TC 29
Edwards (HMIT) v Bairstow & Anor ELR[1956] AC 14
McGregor (HMIT) v Adcock TAX(1977) 51 TC 692
Capital gains tax - Retirement relief - Farmer aged over 60 sold part of farm land and ceased rearing calves only fattening older beasts - Two years later farm building used previously for rearing calves sold for development - Whether sale of building disposal of part of business -Finance Act 1985 section 69 subsec-or-para (2)Finance Act 1985, sec. 69(2)(b) (Finance Act 1985 section 69sec. 69 was replaced by Taxation of Chargeable Gains Act 1992 section 163Taxation of Chargeable Gains Act 1992, sec. 163).
This was an appeal by the Revenue from the determination of the general commissioners for Evesham that retirement relief under theFinance Act 1985 section 69Finance Act 1985, sec. 69was available to a farmer who sold a farm building for development having ceased to use it for the purposes of the business over a period of two years.
The taxpayer was a farmer aged over 60. He farmed 113 acres until September 1986 when he sold 83 acres including the farmhouse. He retained 30 acres including a covered cattle yard which was considered to have development potential.
The taxpayer had kept sheep and cattle. The cattle side of the business had consisted of buying and rearing young calves, keeping them for two to two and a half years, overwintering in the covered cattle yard. Without the covered yard it would have been impossible to rear calves. The last year in which significant numbers of calves were purchased was during the autumn of 1985. During 1986 and 1987 the herd was run down in anticipation of receiving planning permission for development of the covered yard. The taxpayer continued to farm on a much reduced scale, in 1986 and 1987 purchasing only older animals which could be wintered outside and kept for about one year.
Planning permission was granted in September 1987 and the covered yard was sold in September 1988.
The question for decision was whether the sale of the covered yard constituted the disposal of part of the taxpayer's business in order to qualify for retirement relief under the Finance Act 1985 section 69 subsec-or-para (2)Finance Act 1985, sec. 69(2)(a).Finance Act 1985 section 69 subsec-or-para (2)Section 69(2)(b) did not apply because the asset, the covered yard, was not used in the trade immediately before the disposal.
The taxpayer appealed against the inspector's refusal of retirement relief in respect of the gain realised on the disposal of the covered yard in the tax year 1988-89. The general commissioners allowed the appeal. They found that the rearing of calves was fundamentally different from grazing store cattle, that the sale of the covered yard caused the change in the taxpayer's activities and consequently part of the business had been disposed of on the sale.
On their appeal to the High Court the Revenue contended that the change from rearing calves to grazing cattle was not a fundamental change in the business but if it was, since the change predated the sale, the general commissioners misdirected themselves in treating the subsequent disposal as the cause of the change in the business which had previously occurred. The cause of the change in the nature of the business was not the disposal of the covered yard but the prospect of obtaining planning permission for development which in fact happened in September 1987.
The taxpayer contended that the commissioners were not merely entitled but right to find that the sale of the covered yard caused the fundamental change from rearing calves to grazing cattle notwithstanding that the change had already occurred at the time of the sale. He submitted that there had been a continuing process of running down the herd. In the mean time the taxpayer applied for planning permission but the process of effecting the change was completed only by the sale of the covered yard. It would be unrealistic to expect the taxpayer to carry on with his herd at full strength right up to the moment of sale, bearing in mind that he would have to dispose of the animals, possibly by means of a forced sale.
Held, allowing the Revenue's appeal:
The taxpayer had in mind to sell the land at an advantage when planning permission was obtained and he changed the nature of his business so that he no longer required the land in question for the purposes of his business. Then, having obtained planning permission, he sold the land. To categorise the sale of the land in those circumstances as the sale of part of the business would appear to be the antithesis of the true position. The land in question was no longer required for the purposes of his business when he disposed of it so that it could not be said that the sale caused the change in the business.
There was no reason to interfere with the commissioners' finding of fact that the change from rearing calves to grazing store cattle was a fundamental change. However, since the change predated the sale, the sale had not caused it. The fundamental nature of the change did not affect the only true and reasonable conclusion on the facts of the case, namely that the sale of the covered yard was not a disposal of part of the taxpayer's business within the meaning of the Finance Act 1985 section 69 subsec-or-para (2)Finance Act 1985, sec. 69(2)(a).
1. At a meeting of the general commissioners for Evesham held on 12 February 1992 at Evesham Town Hall, Gilbert Henry Daffurn ("the taxpayer") of Princes Farm, Aston Somerville, Broadway, Worcestershire appealed against the refusal by HM Inspector of Taxes to grant relief under Finance Act 1985 section 69sec. 69 of the Finance Act 1985 (retirement relief) for the year of assessment 1988-89.
2. Shortly stated the question for determination was whether the sale of 0.622 acres comprising a covered cattle yard (hereinafter referred to as "the property") at Princes Farm, Aston Somerville on 27 September 1988 constituted the disposal of the whole or part of the taxpayer's business within Finance Act 1985 section 69 subsec-or-para (2)sec. 69(2)(a) of the Finance Act 1985.
3. Mr Derek John Pepper, the district inspector of taxes at Evesham, appeared on behalf of the Crown. The taxpayer who gave oral evidence before us was...
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