Taddale Properties Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 14 April 1987 |
| Date | 14 April 1987 |
| Court | Chancery Division |
Chancery Division.
Mr. Edo De Vries (instructed by Messrs. Walsh, Lawson & Fireman) for the taxpayer company.
Mr. Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Scott J.
Development land tax - Deduction - Expenditure incurred on enhancing value of land - Compensation paid to company surrendering use of land as condition for planning permission being granted for taxpayer's land - Whether compensation deductible - Development Land Tax Act 1976,Development Land Tax Act 1976 schedule 3 subsec-or-para 1Sch. 3, para. 1.
This was an appeal from the decision of a Special Commissioner that the taxpayer company was not entitled to take into account in calculating the development gain accruing on a disposal of land, £80,000 which was claimed as expenditure incurred in enhancing the value of the land.
In 1978 the taxpayer company (Taddale) was negotiating for a lease of land at Clarendon Street, Cambridge, and with the Cambridge City Council for planning permission to develop the land. In 1980 an agreement was reached with the City Council that a company (W) in the same group as Taddale should surrender the industrial use of land which it owned as a condition for the grant of planning permission for the development of the Clarendon Road land. The surrender of industrial use resulted in a reduction of £80,000 in the value of the land. On 4 December 1978 Taddale paid £280,000 to W for a property in Newmarket Road, Cambridge, which had been acquired by the group for £200,000, with the intention of compensating W in advance for the depreciation of its land. On 5 July 1979 Taddale had entered into an agreement for a lease of the Clarendon Road land and in 1981 it sold the benefit of the agreement to a purchaser outside the group.
Taddale appealed against a determination to development land tax in the sum of £92,000 for the year 1980-81, claiming that the £80,000 added as compensation to the purchase price of the land which it had acquired from W, was expenditure incurred in enhancing the value of the Clarendon Road land within the meaning of the Development Land Tax Act 1976,Development Land Tax Act 1976 schedule 3 subsec-or-para 1Sch. 3, para. 1, and should be taken into account in calculating the realised development value of the land. Before the Special Commissioner the Crown conceded that if there had been an agreement between Taddale and W that W would be compensated by an addition to the price of the Newmarket Road property, the deduction would have been allowed. The Commissioner, dismissing the appeal, found no evidence of such an agreement.
Taddale appealed to the High Court.
Held, allowing Taddale's appeal:
It was not realistic to look for a formal agreement where two companies were under the same management. The purpose and effect of adding £80,000 to the price paid by Taddale to W for the Newmarket Road property was to compensate W in advance for the reduction in value of its land consequent on the surrender of industrial use. The £80,000 was therefore a real item of expenditure by Taddale which helped to realise the price obtained by Taddale for the Clarendon Road land.
1. On 18 October 1985 one of the Commissioners for the special purposes of the Income Tax Acts heard the appeal by Taddale Properties Ltd. ("Taddale") against an assessment to development land tax made on it for the year 1980-81 in the sum of £92,000.
2. [Paragraph 2 listed the documents proved or admitted before the Commissioner.]
3. The question for determination, the findings of fact, the contentions of the parties and the conclusion appear from the Commissioner's decision in principle which was delivered in writing on 21 November 1985.
4. Bolton (H.M.I.T.) v. International Drilling Co. Ltd. TAX[1983] BTC 3 was cited in argument on behalf of Taddale.
5. On 5 March 1986, following agreement of figures by the parties, the Commissioner determined the appeal by reducing the assessment to £72,050.
6. Dissatisfaction with the Commissioner's determination as being erroneous in point of law was expressed immediately on behalf of Taddale, and on 17 March 1986 the Commissioner was required to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970, Taxes Management Act 1970 section 56sec. 56.
7. The question for the opinion of the court was whether the Commissioner erred in law in arriving at his conclusion.
1. Taddale Properties Ltd. ("Taddale") appeals against an assessment to development land tax made on it for the year 1980-81 in the sum of £92,000. Taddale was incorporated under the name of Kerridge Properties Ltd. and before acquiring its present name had changed its name to Carlton Whitten Properties Ltd.
2. The question for my determination is whether, in the calculation of realised development value consequent on the disposal by Taddale to Trafalgar House Developments Ltd. on 23 February 1981 of land at Clarendon Road, Cambridge ("the Clarendon Road land"), a deduction should be made in respect of depreciation of land at Sturton Street, Cambridge ("the Sturton Street land"), owned by Welprestige Ltd. ("Welprestige"), a member of the same group of companies as Taddale. That depreciation was the result of an agreement ("the sec. 52 agreement") made between those two companies, Cambridge City Council and the British Railways Board on 30 January 1980 pursuant to section 52sec. 52 of the Town and Country Planning Act1971 and section 126sec. 126 of the Housing Act 1974.
section 52 subsec-or-para (1)Section 52(1) provides as follows:
A local planning authority may enter into an agreement with any person interested in land in their area for the purpose of restricting or regulating the development or use of the land, either permanently or during such period as may be prescribed by the agreement; and any such agreement may contain such incidental and consequential provisions (including provisions of a financial character) as appear to the local planning authority to be necessary or expedient for the purposes of the agreement.
section 126Section 126 of the Housing Act1974 makes provision regarding the enforceability of certain covenants in agreements relating to the development of land.
3.(a) By an agreement ("the lease agreement") dated 5 July 1979 (subsequently varied by a deed of variation dated 26 September 1980) the British Railways Board agreed to grant to Taddale a lease of the Clarendon Road land.
(b) On 30 January 1980 the sec. 52 agreement was entered into. By reason of the covenants given by Welprestige in cl. 3 and 4 of that agreement relinquishing its right to use the Sturton Street land for industrial purposes, the current use value of that land was reduced from £155,000 to £25,000. By cl. 8 Cambridge City Council granted Taddale planning permission to develop the Clarendon Road land by erecting an office block with parking facilities. An amended planning permission was granted to Taddale on 14 January 1981. For some reason which was not explained to me the City Council on the same date granted outline planning permission for the development to Welprestige in accordance with an application made by that company on 26 February 1979.
(c) On 23 February 1981 Taddale agreed to sell to Trafalgar House Developments Ltd. for £175,000 the benefit of the lease agreement (as varied).
(d) On 7 October 1982 Welprestige (by its receiver), having obtained outline planning permission for residential development, sold the Sturton Street land for £146,000 to a purchaser outside the group.
(e) Welprestige and Taddale were at all relevant times members of a group of companies, headed by Taddale Investment Ltd., which included (among other companies) Kerridge Construction Ltd. ("Kerridge Construction").
(f) A letter dated 17 October 1985 written by Mr. M.R. Carlton, a director at all relevant times of both Taddale and Welprestige, was put in evidence on behalf of Taddale with the consent of Mr. Ridd, who appeared for the Revenue.
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(f) This letter was written by Mr. Carlton from memory and is in the most confusing terms as he had clearly forgotten which properties were transferred within the group and by which companies in connection with the matters in issue in this appeal. The following copy documents were put in evidence with this letter:
(i) An agreement dated 21 September 1978 whereby Kerridge Construction agreed to sell to Peak's Furnishers Ltd. ("Peak's") property in Denny End Road, Waterbeach, for £120,000 and Peak's agreed to sell to Kerridge Construction for £200,000 property in Newmarket Road, Cambridge ("the Newmarket Road property"). The respective purchases were to be completed by deed of exchange whereunder Kerridge Construction was to pay Peak's £80,000 by way of equality of exchange.
(ii) An assignment dated 4 December 1978 whereby for the sum of £1,000 (representing the amount of the deposit paid by Kerridge Construction to Peak's) paid by Welprestige to Kerridge Construction, Kerridge Construction assigned to Welprestige the benefit of the agreement of 21 September 1978 so far as it related to the purchase by Kerridge Construction from Peak's of the Newmarket Road property for the sum of £200,000.
(iii) An agreement dated 4 December 1978 whereby Welprestige agreed to sell the Newmarket Road property to Taddale (then Carlton Whitten Properties Ltd.) for £280,000.
(f) On the strength of Mr. Carlton's letter and the above-mentioned documents I make the following findings of fact:
(i) Prior to December 1978 Mr. Carlton was in negotiation with the British Railways Board for the lease agreement regarding the Clarendon Road land and with the Cambridge City Council for the grant to Taddale of permission to develop that land. The Council knew of Mr. Carlton's involvement with Welprestige and that that company owned the Sturton Street land. The Sturton Street land, which was used for...
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Taddale Properties Ltd v Commissioners of Inland Revenue
...Tax Act 1976 schedule 3 subsec-or-para 1Development Land Tax Act 1976, Sch. 3, para. 1. This was an appeal from a decision of Scott J. ([1987] BTC 8059) that the taxpayer company was entitled to deduct £80,000 from a development gain accruing on a disposal of land as expenditure incurred in......