Taylor v Good (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 22 February 1974 |
| Date | 22 February 1974 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Income tax, Schedule D-Trade-Purchase and sale of land-Purchase conceded not to be a trading adventure-Whether land appropriated to trading after purchase.
The Appellant carried on two retail businesses in a country town. He lived with his wife, who assisted him, in a two-bedroomed council flat over one of the shops. They had three daughters, two of whom were married. In July 1959 a gentleman's house with 17 rooms, where both his parents had once been in service, and where he had occasionally worked during school holidays, was put up for auction, together with 91/2 acres of grounds. It was then in a bad state of repair. He entered the bidding, without expecting to be successful, and to his surprise the property was knocked down to him for £5,100. He had not decided what to do with it if he bought it but had in mind possibly going to live there. On inspecting the interior of the house his wife rejected that idea as impracticable, and he abandoned it. In September 1959 he applied for permission to develop, and his appeal against the local authority's refusal was allowed by the Minister in June 1960 after a public inquiry. Planning permission for the demolition of the house and the erection of 90 dwellings was granted in 1962. The Appellant never advertised the property because he did not need to, but he received several offers. He sold it in September 1963 to a firm of developers for £54,500.
On appeal against an assessment to income tax under Case I of Schedule D for the year 1963-64 in respect of the excess of the sum so realised over the purchase price, the Appellant contended that his motive in buying the property was to acquire a residence for himself and his wife and, occasionally, his daughters. For the Crown it was contended that the purchase and sale constituted a trade or an adventure or concern in the nature of trade. The Special Commissioners found that the Appellant never had a fixed or settled intention of buying the property for use as a residence, that on a detailed inspection he and his wife wholly abandoned any intention of living there, and that shortly afterwards he took steps to enhance its value with a view to development and sale. They held that his transaction in connection with the property was an adventure or concern in the nature of trade.
In the High Court and above it was conceded for the Crown that the circumstances of the purchase were not such that the purchase could be regarded as part of an adventure in the nature of trade.
Held, that on the facts found excluding the purchase, which had been conceded not to be part of an adventure in the nature of trade, there was no evidence of such an adventure.
Hudson's Bay Co. v. Stevens (1909) 5 T.C. 424applied; Mitchell Bros. v. Tomlinson (1957) 37 T.C. 224 and Pilkington v. Randall (1966) 42 T.C. 662 distinguished.
Stated under the Taxes Management Act 1970, s. 56, 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 21st January 1971 Walter Marcus Taylor (hereinafter called "the Appellant") appealed against an assessment to income tax of £48,895 for the year 1963-64.
2. Shortly stated, the question for our decision was whether the surplus on realisation from the sale of a property known as Marle Hill Court was a profit derived from a trade or an adventure or concern in the nature of trade within Case I of Schedule D or a capital increment outside the scope of income tax.
3. The following witnesses gave evidence before us: the Appellant; his wife, Mrs. I. L. K. Taylor; his daughter, Mrs. N. Howarth; Mr. William Way; Mrs. Kate Danson.
4. The following documents were proved or admitted before us:
(a) A plan of Marle Hill Court.
(b) Particulars of Marle Hill Court and other properties offered for sale by auction on 23rd July 1959.
(c) Application for outline planning permission dated 18th September 1959 and refusal dated 16th November 1959.
(d) Application for outline planning permission dated 23rd November 1961 and permission for development dated 22nd January 1962.
(e) Letter dated 9th January 1965 from Messrs. A. W. Mann & Co. to H.M. Inspector of Taxes, Cheltenham 1st District.
(f) Letter dated 6th December 1960 from the Appellant.
(g) Declaration dated 21st June 1960 by the Appellant.
Copies of the above are annexed hereto as exhibits and numbered 1 to 7 respectively(1).
5. As a result of the evidence, both oral and documentary, adduced before us we find the following facts proved or admitted:
(a) The Appellant, assisted by his wife, carried on two businesses in Cheltenham, one as a retail grocer and the other as a newsagent and post office. The two businesses were conducted in shops nearly next door to each other, and the Appellant and his wife lived in a two-bedroomed council flat above the grocer's shop. They have three daughters, two of whom are married, and (at the relevant time) one grandchild. Until May 1959 the Appellant had been a councillor of the Cheltenham Council for approximately nine years, and he was chairman of the Parks and Recreation Committee for seven years. As a councillor he had been in a position to see the minutes of other committees, including the Planning Committee.
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(b) The Appellant owns six properties which he has acquired since about 1960 for investment.
(c) Marle Hill Court was a gentleman's residence built in the Regency period, and was occupied until 1958 or early 1959, when it became unoccupied. In the 1920's Marle Hill Court was occupied by a Mr. Boulton, who died in 1933 or 1934. The house and curtilage comprised 91/2 acres of land. Mr. Boulton kept livestock on the land. During Mr. Boulton's occupation the property had been well maintained, but after his death the property, which was first occupied by his daughter and her husband, and after her death by her husband, deteriorated considerably. During the second world war the property had been requisitioned by the Government and six families were billeted there. Provision had been made for gas stoves in the occupied rooms, but it had never been supplied with electricity. No major structural conversion was made during the time it was requisitioned, and there was only one bathroom. The property had approximately 17 rooms and a garage and outhouses.
(d) The Appellant knew the property well; his mother had worked there for Mr. Boulton and his father had been employed there as a gardener and general farm hand. The Appellant and his brother and sisters had worked there occasionally during their school holidays.
(e) In July 1959 the Appellant noticed that Marle Hill Court was advertised for sale by auction, which was to take place on 23rd July 1959. Two or three days before the auction the Appellant went to look round the property, but he did not go inside. He decided to bid for it at the auction, though he did not expect to be successful and had not taken his cheque book with him. At the auction there were about 20 people present, only two of whom bid for Marle Hill Court, the Appellant and a Mr. Martin. The Appellant and Mr. Martin took the bidding to £5,000, at which point the Appellant hesitated and then bid a further £100, and he was somewhat surprised when the property was knocked down to him at that figure. At the time of the auction the Appellant had not decided what to do with the property if he bought it; but he had in mind going with his wife to live in it if this proved to be feasible. It had a sentimental attraction to him in view of his and his parents' connection with it.
(f) On the evening of the day of the auction the Appellant took his wife to see the property. They could not go inside, as they had not a key. The Appellant's bank manager, whom he took to see the property, was agreeable to the necessary overdraft being allowed to enable the purchase to be completed. The Appellant and his wife discussed the possibility of living in the property because their flat was too small to accommodate their daughters and grandchild, who visited them from time to time, and they had been looking for somewhere else to live. When, subsequently, the Appellant and his wife, accompanied by two of their daughters, saw the interior of the property, his wife soon realised that their thoughts of using it as a residence for themselves were impracticable. There was a good deal of rubbish in the house. It had a gas geyser in the bathroom, the decoration was in a very poor state and it had no electricity. The Appellant assured his wife that the defects could be remedied, but she raised other objections; her daughters did not think it was practical or convenient, and she was troubled by its isolation and its proximity to a local refuse tip. Some vandals had committed damage, and boys raided the orchards. The property was a long way from the newsagent and post office which she managed in Cheltenham, and as she did not drive a car she would have found it difficult to get to the shop early in the morning. In face of his wife's attitude the Appellant abandoned the idea of living in the property.
(g) The Appellant and his wife cleaned some rooms in the property and began to clear out the rubbish, made curtains and cut the grass and the high hedges round the property. After a time the Appellant installed his nephew in two or three rooms in the property rent-free and in effect as a caretaker. The nephew made some minor alterations and decorations, including the installation of a fireplace. The Appellant rented the grazing of the fields attached to the property to a farmer for a rent of £6 a month. The farmer grazed this land for approximately three years, and the Appellant's nephew occupied the property for approximately the same period.
(h) In September 1959 the Appellant consulted...
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