The Commissioners for HM Revenue and Customs v Francesca Louise Thoresby Lockyer Caroline Vanessa Thoresby Lockyer (as The Personal Representatives of Nicolette Vivian Pawson, Deceased)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs |
| Judgment Date | 02 October 2013 |
| Neutral Citation | [2013] EWCA Civ 1864 |
| Docket Number | A3/2013/1038 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 October 2013 |
[2013] EWCA Civ 1864
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH CoURT OF JUSTICE
(TAX AND CHANCERY CHAMBER)
Royal Courts of Justice
Strand
London WC2A 2LL
Lord Justice Briggs
A3/2013/1038
Mr Keith Gordon (instructed by Field Fisher Waterhouse) appeared on behalf of the Appellants
The Respondents did not appear and was not instructed
This is the oral renewal by the taxpayer, the personal representatives of the late Nicolette Pawson, of an application for permission to appeal a decision of the Upper Tribunal (Henderson J) on 28 January of this year in which he allowed HMRC's appeal from the decision of the First-tier Tribunal on 14 December 2011, that the deceased's 25 per cent share in a family owned seaside bungalow qualified for business property relief and inheritance tax. Permission to appeal was refused on paper by Lloyd LJ on 23 May 2013.
The uncontentious facts are that the bungalow was run for profit as a holiday letting business for the qualifying two-year period before Mrs Pawson's death on 20 June 2006, apart from three weeks each year when used by the family. Letting could typically range between a long weekend and a fortnight, but the bungalow was kept furnished, cleaned and in good repair, clean bed clothes, cleaning materials and a welcome pack were provided, and the amenities include a television and a telephone and the use of the bungalow's large garden with direct access to the beach.
Sections 104 and 106 of the Inheritance Tax Act 1984 extend 100 per cent relief for relevant business property, which includes a business or an interest in the business unless, and this is section 105(3), the business consists wholly or mainly of inter alia making or holding investments. I will call that the investment exception. In such a case the property may be business property, but it is not relevant business property.
Having decided that the holiday letting business of the bungalow was business property, the First-tier Tribunal decided that the investment exception did not apply. The Upper Tribunal decided on Edwards v Bairstow [1956] AC 14 grounds, that although it was by then common ground the bungalow and its holiday letting business was business property; it was not relevant business property because of the facts found by the First-tier Tribunal. The only conclusion to be derived from a correct legal analysis was that the business consisted mainly, albeit not wholly, of holding investments.
This is a second appeal and it is said to raise a point of general importance because of its potential applicability to a large number of holiday letting businesses in the inheritance tax context. Like Lloyd LJ, I agree. The question is, however, whether it has a real prospect of success.
After a review of the relevant authorities, including one English and one Northern Ireland Court of Appeal decision, Henderson J's analysis may be summarised as follows:
(a) Property investment business is not limited to passive investment. It may involve active management, such as finding tenants, negotiating tenancies or licences, repairing and improving the property and dealing with tenants' complaints. Those activities are merely incidents of this type of investment business;
(b) There is a spectrum of business activity involving land and buildings in which, some, like running a hotel or a shop, are not investment business, but others, such as the holding property for letting, usually are;
(c) Generally where a building is used for occupational letting the provision of additional services to occupants, whether or not the cost of...
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Executors of the Estate of Ross (Deceased)
...TC 01748, R & C Commrs v Lockyer (personal representatives of Pawson dec'd) [2013] BTC 1,605 and the related Court of Appeal decision; [2013] EWCA Civ 1864 Trustees of David Zetland Settlement [2013] TC 02690 Best (Executor of the Estate of Buller dec'd) [2014] TC 03217 Green [2015] TC 0451......