Powell and Another (executors of Pearce dec'd) v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 27 April 1997 |
| Date | 27 April 1997 |
| Court | Special Commissioners (UK) |
special commissioners decision
Mr THK Everett.
Robert Grierson of counsel for the appellant.
Christopher Tidmarsh of counsel for the Crown
Inheritance tax - Business property relief - Deceased's business was running a caravan site - Deceased received rent for caravan standings and chalets - Obligation to provide basic facilities and maintain site - Relief not available as business consisted wholly or mainly of holding investments - Appeal dismissed - Inheritance Tax Act 1984Inheritance Tax Act 1984, s. 105(3).
"Business Property Relief" is a relief from Inheritance Tax chargeable on a transfer of value. It is available in respect of "relevant business property" which includes "property consisting of a business": Inheritance Tax Act 1984 sections 104 and 105(1)(a). Section 105(3) excludes from the category of relevant business property, among other things, a business that consists wholly or mainly of holding investments. Section 105(3) in full reads as follows:
A business or interest in a business, or shares in or securities of a company, are not relevant business property if the business or, as the case may be, the business carried on by the company consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments.
The personal representatives of Gladys Edith Pearce deceased ("Mrs Pearce") appeal against determinations dated 1 September 1995 of the Commissioners of Inland Revenue in respect of a transfer of value deemed to have been made on her death on 16 June 1992. The Notices of Determination provided that:
The business in which [Mrs Pearce] used the property Mobile Home Park, Lyngfield Park, 222 Windsor Road, Bray, Berkshire, consisted mainly of holding investments within the meaning of section 105(3) of the Inheritance Tax Act 1984.
Mr Pearce's personal representatives, who are her two daughters, appeal against the Notices of Determination served upon them and the agreed question for determination is whether the business of Gladys Edith Pearce (deceased) referred to in the Notices of Determination of 1 September 1995 consisted wholly or mainly of holding investments within the meaning of subsection 3 of section 105 of the Inheritance Tax Act 1984.
Prior to the hearing of this appeal the Respondents have accepted that the activities of Mrs Pearce in relation to her property constituted a business. They have also accepted that the business did not consist wholly or mainly of making investments. The sole issue before me is whether Mrs Pearce's business consisted "wholly or mainly of holding investments".
No oral evidence was given. The evidence before me consisted of a statement of agreed facts (bundle TP4) and three bundles of exhibits (TP1, TP2 and IR1). The exhibits consisted mainly of correspondence.
From the documents placed in evidence I find the following relevant facts:
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1. Mrs Pearce died on 16 June 1992. The executor named in her Will having renounced Probate, a grant of letters of administration with the Will annexed was made to the Appellants out of the Oxford District Probate Registry on 20 November 1992.
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2. For some time before 1965 until her death in 1992 Mrs Pearce ran a Mobile Home Park business ("the business") at the Mobile Home Park, Lyngfield Park, 222 Windsor Road, Bray, Berkshire ("The Mobile Home Park"). The business, in summary, involved the hiring out of caravan pitches on both long and short term residential lettings, together with the provision of ancillary utilities and services and of related amenities.
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3. Mrs Pearce had inherited the freehold of the land of the Mobile Home Park ("the Land") from her father upon his death in 1965. Mrs Pearce's father had been a butcher who had reared animals on the land and otherwise cultivated it as a smallholding from before the second World War. Caravan site use of the land had started on part of the land during the second World War and continued thereafter. A full development of the land as a Mobile Home Park was commenced by Mrs Pearce in the early 1960s.
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4. The infrastructure of the developed site has at all material times comprised electricity supply cables and telephone lines serving each of the individual Mobile Home pitches, roads and road lighting, a recreation area, a house and a shop (both empty at the date of Mrs Pearce's death), and a toilet block (no longer in commission at the date of Mrs Pearce's death), and sewerage with collection point and pumping station to mains drain. The Mobile Homes are individually metered for electricity usage via meters in the Mobile Homes. Water usage is similarly individually metered.
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5. Until 1983 Mrs Pearce employed a site warder (sic) who resided on the Mobile Home Park and was responsible for site maintenance and security. Thereafter Mrs Pearce and the Appellants, together with other members of the family took over the daily tasks of site maintenance and security. At all material times both Mrs Pearce (until her death) and Mrs Stasia Halfhide ("Mrs Halfhide"), one of Mrs Pearce's daughter and one of the Appellants, have lived at the Mobile Home Park.
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6. It is essential for the smooth running and security of the Park that some representative of the owner should be in constant 24 hour attendance, e.g. for security purposes and to ensure and supervise the delivery of gas bottles for the Mobile Homes. All the residents of the Mobile Home Park rely heavily on the family for service and help when the electricity or gas supply breaks down. The majority of residents are long term residents, and are in many cases older persons including retired couples. Especially for these residents the family makes social visits and organises medical call outs.
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7. As stated, since 1983 Mrs Pearce's family has conducted all the maintenance and security work of the Mobile Home Park. The tasks of maintenance include:
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(i) electricity and water meter readings;
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(ii) grass cutting;
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(iii) ditching;
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(iv) hedging;
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(v) security;
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(vi) painting, cleaning and otherwise maintaining site vans.
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8. Permanent planning permission and a site licence have been granted by the Royal Borough of Windsor and Maidenhead for 35 mobile homes. On 30 June 1992 33 units were sited on the Mobile Home Park of which 23 were privately owned and paying a pitch fee. Of those 23 eighteen of the units paid a rental of £55 per four week period. The remaining five privately owned units paid a rental of £60 per four week period. Of the remaining ten units, three are owned by the Appellants personally and for which no pitch fees are paid. The remaining seven units ("the Hire Fleet") are available for short term lets. As at 30 June 1992 three of the hire fleet units were occupied and let at a rental of £30 per week. The other four units were vacant including one occupied most recently by Mrs Pearce. The information in this paragraph is obtained from the valuation report prepared by Messrs Edwards and Partners for the Appellants and dated 6 July 1992. It is to be found at pages 30-41 inclusive in bundle TP1.
9. The site includes an unoccupied house and a vacant shop. The report and valuation of Messrs Edwards and Partners referred to above contains (inter alia) the following extracts:
We are informed that no new unit sales have taken place for at least five years. However there was an assignment of ownership (No. 24) last month [after the death of Mrs Pearce] which sold at £15,000 from which the Park owners derived a 10% commission.
The house is in a state of considerable disrepair, as a result of both neglect during the time it has been unoccupied, together with a lack of modernisation before this. Whilst we did not carry out a structural survey on this building (since this was beyond the scope of our instructions) from our initial inspection it is evident that substantial repair work is urgently needed.
By modern standards the Mobile Home Park is a development of below average quality occupied by old, predominantly single unit,...
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