Pilkington v Randall
| Jurisdiction | England & Wales |
| Judgment Date | 10 February 1966 |
| Date | 10 February 1966 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Income Tax, Schedule D - Sales of land - Land devised on trust for sale for benefit of vendor and another - Purchase by vendor of co-beneficiary's interest - Whether vendor carried on trade of developer.
The Appellant's father, who died in 1929, devised an estate of 100 acres on trust for sale for the benefit of his wife, who died in 1945, for life, with remainder to the Appellant and his sister. Between 1929 and the outbreak of war the father's executors made several roads and sold about 30 acres in plots. Sales were resumed in 1949. His sister having requested in October, 1953, that the land remaining in the surviving executor's name should be sold at the earliest possible moment, the Appellant on 31st March, 1954, purchased her interest in 11 acres, and on 3rd March, 1955, her interest in the remaining 35 acres. Outline planning permission had been given for the whole of the land many years earlier. After March, 1954, the Appellant constructed roads and installed drains and services with a view to selling plots to the best advantage. The plots were advertised for sale in the local press and by a board on the site, and sales took place continuously. The Appellant bought back one plot and subsequently resold it at a profit.
The Appellant was assessed to Income Tax under Schedule D for the years 1953-54 to 1962-63 in respect of profits from the development and sale of land. On appeal, he contended that the sales were merely realisations of inherited property. For the Crown it was contended that the Appellant commenced to trade as an estate developer on 31st March, 1954, and that trade embraced all purchases and sales thereafter. The Special Commissioners accepted the Crown's contention.
Held, that the Commissioners' decision was justified.
Stated under the Income Tax Act, 1952, Section 64, 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 22nd and 23rd July, 1963, D.C. Pilkington (hereinafter
called "the Appellant") appealed against the following assessments to Income Tax:Amount of |
|||||
Year |
assessment |
||||
£ |
|||||
1953-54 |
… |
… |
… |
… |
4000 |
1954-55 |
… |
… |
… |
… |
12,000 |
1955-56 |
… |
… |
… |
… |
5000 |
1956-57 |
… |
… |
… |
… |
7500 |
1957-58 |
… |
… |
… |
… |
7500 |
1958-59 |
… |
… |
… |
… |
7500 |
1959-60 |
… |
… |
… |
… |
1000 |
1960-61 |
… |
… |
… |
… |
1000 |
1961-62 |
… |
… |
… |
… |
1000 |
1962-63 |
… |
… |
… |
… |
1000 |
2. Shortly stated the question for our decision was whether the Appellant was assessable to Income Tax for the relevant years in respect of profits from the development and sale of land.
3. The Appellant gave evidence before us.
4. The following documents were proved or admitted before us(1):
(1) Plan.
(2) Copy of will of A.A. Pilkington deceased.
(3) Copy of assent dated 31st March, 1954.
(4) Copy of conveyance dated 31st March, 1954.
(5) Copy letters dated 9th October, 1953, and 29th October, 1953.
(6) Copy of assent dated 3rd March, 1955.
(7) Copy of conveyance dated 4th March, 1955.
(8) Copy of letter dated 8th July, 1954.
(9) Copy of letter dated 23rd February, 1954.
(10) Schedule of sales of land between March, 1954, and August, 1957.
(10) (a) Schedule of sales of land from August, 1957.
(11) Approximate accounts.
Copies of such of the above as are not annexed hereto as exhibits are available for inspection by the Court if required(1).
5. As a result of the evidence both oral and documentary adduced before us we find the following facts proved or admitted:
(2) The Appellant's father died on 15th February, 1929; part of his estate consisted of land near Sutton Coldfield. Under his will his widow received a life interest. Subject to the life interest of their mother the Appellant and his sister were co-beneficiaries of the land. Their mother died on 10th March, 1945.
-
(3) During the period from 1929 until the outbreak of the war the father's executors made several roads and sold approximately 30 acres of the land in
plots, some freehold and some leasehold. In 1939 there were about 70 acres unsold, comprising land in the middle of the plan marked exhibit 1(1) and the plots coloured yellow, brown and purple on the said plan. (4) After the death of the mother the father's executors (the Appellant and a solicitor named Mason, who died in 1947) distributed that part of the estate that then consisted of ground rents; the plots marked red on the said plan went to the Appellant, and those marked blue went to his sister; but a large part of the land remained in the name of the executors. No land was sold during the years 1940 to 1948 inclusive.
(5) From 1949 onwards several sales were made by the Appellant and by his sister and some were made by the executor. In letters dated 9th October, 1953, and 29th October, 1953 (exhibit 5(1) ), the sister's solicitors informed the Appellant's solicitors that she desired that all the land remaining in the name of the executor should be sold at the earliest possible moment.
(6) On 31st March, 1954, an assent was made between the executor of the one part and the Appellant and his sister of the other part (exhibit 3(1) ) and on the same date a conveyance was made (exhibit 4(1) ) whereby the Appellant purchased from his sister her share in approximately eleven acres of the land.
(7) On 3rd March, 1955, an assent was made (exhibit 6(1) ) and on 4th March, 1955, a conveyance was made (exhibit 7(1) ) whereby the Appellant purchased from his sister her share in most of the balance of the land, approximately 35 acres, previously held in the name of the executor. The intention was to convey the whole of the balance of the land, but it was later discovered that a small piece of about half an acre had been overlooked. No evidence was furnished to us concerning the disposal of the said half an acre.
(8) Outline planning permission had been given in respect of the whole of the land many years before the transactions in March, 1954, and March, 1955. After the purchase of his sister's share of the eleven acres in March, 1954, the Appellant constructed a service road (described as East View Road on the said plan) in order to sell plots numbered 30 to 38 and he also had drains constructed and services installed. The Appellant also constructed other roads and installed services in order to sell plots of the whole area of land to the best advantage. He continued to employ the same estate agent who had been employed by the executors. The agent advertised plots for sale in the local press, and erected a board on the land saying that plots were for sale. The Appellant also bought back a single plot that he had sold to an architect, and subsequently the Appellant sold it again at a profit.
(9) Exhibit 10(1), attached to this Case, contains a list of sales of plots by the Appellant from March, 1954, to August, 1957, and exhibit 10(a)(1) , attached to this Case, contains a list of sales for the two years ended 5th April, 1960, and 5th April, 1961. From March, 1954, to March, 1955, the Appellant sold 20 plots; from May, 1955, to January, 1956, he sold fourteen plots and from April, 1956, to August, 1957, he sold seven plots. Many of these plots were large areas sold to builders; one plot was sold for £18,000, another for £12,825 and another for £7,777, but there were many sales of single plots. Exhibit 11(1), attached to this Case, contains approximate accounts of sales and expenses for the years ending 31st March, 1954, to 31st March, 1961, inclusive.
6. It was contended on behalf of the Appellant that he improved and developed inherited property, and that the sales were merely realisations of an inheritance and were not trading sales.
7. It was contended on behalf of the Inspector of Taxes that a trade as estate developer was commenced by the Appellant on 31st March, 1954, when he purchased the eleven acres from his sister and that that trade continued and embraced (in addition to the land inherited under his father's will) all purchases and sales of land thereafter.
8. We the Commissioners who heard the appeal found against the Appellant.
Neither side had made an alternative submission inviting us to exclude from the ambit of the Appellant's trading activities the proportionate part of the land that he inherited personally. On behalf of the Appellant it had been contended that there was no trade at all; and on behalf of the Inspector of Taxes it had been contended that a trade was commenced on 31st March, 1954, and that the commencing stock of that trade included not only the share of land bought from the sister but the Appellant's share as well. The answer to this case depended on a review of all the facts. In considering all the facts we bore in mind, in particular, the following matters. The land in question had long ago been designated by the appropriate authority as land to be developed for building houses. There was an interval of a year between the two purchases from the Appellant's sister. The Appellant had bought back and resold a plot previously sold to an architect. He had made roads, constructed drains, had had services installed. He had employed an agent to sell the land in plots, and the process of selling and developing continued over a number of years. While it was apparent from the two letters in October, 1953, that the sister wanted the executor to sell all the land quickly, we did not take the view that the subsequent purchases by the Appellant from his sister were merely transactions effected for the purpose of realising the Appellant's inheritance. The Appellant gave evidence before us, and we are in no doubt that the reason why he bought his sister's share was to make a profit by reselling it after development. Having regard to all the facts that we have found in the Case, we hold that as from March, 1954, when he made the first purchase...
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