Webb v Conelee Properties Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 01 November 1982 |
| Date | 01 November 1982 |
| Court | Chancery Division |
Chancery Division.
Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. A.G. Wilson (instructed by Messrs. Kenwright & Cox) for the taxpayer company.
Before: Warner J.
Receipts from land from licensees - Whether taxpayer company is an investment company or a trading company - Whether taxpayer company retains "occupation" by not granting exclusive possession - Whether management activities may constitute trading - Income and Corporation Taxes Act 1970 schedule AIncome and Corporation Taxes Act 1970 - Sch. A (sec. 67); Income and Corporation Taxes Act 1970 schedule DSch. D, Case I (sec. 109); Income and Corporation Taxes Act 1970 section 110 subsec-or-para (3)sec. 110(3); Income and Corporation Taxes Act 1970 section 130 subsec-or-para (a)130(a); Income and Corporation Taxes Act 1970 section 304 subsec-or-para (5)304(5).
The taxpayer company (C Ltd.) acquired and disposed of properties, found licensees to occupy them, granted licences and generally managed the properties. The General Commissioners concluded that C Ltd. was not an investment company within Income and Corporation Taxes Act 1970,Income and Corporation Taxes Act 1970 section 304 subsec-or-para (5)sec. 304(5) but was a trading company trading in the letting of properties producing a rental. They found a greater degree of personal involvement and active management by those managing the company than would normally be associated with those managing an investment company. This, the Commissioners considered, was borne out by the grant of licences rather than of exclusive possession under leases. They held, therefore, that C Ltd. was entitled to deduct expenditure of £10,403 from its profits by virtue of Income and Corporation Taxes Act 1970 section 130 subsec-or-para (a)sec. 130(a) of the Income and Corporation Taxes Act 1970.
The Crown appealed from the findings of the Commissioners. C Ltd. contended, in an argument not laid before the Commissioners, that it retained occupation of the properties by granting mere licences and so fell within Income and Corporation Taxes Act 1970 section 110 subsec-or-para (3)sec. 110(3) of the Income and Corporation Taxes Act 1970.
Held, appeal allowed.
1. For Income and Corporation Taxes Act 1970 section 110 subsec-or-para (3)sec. 110(3) to apply, C Ltd. had in fact to occupy the land in question. The mere grant of licences instead of exclusive possession under leases does not mean that C Ltd. retained actual occupation. In the absence of a finding of occupation by the Commissioners the claim must fail.
2. There is no such trade as "the letting of properties producing a rental".
3. Mere management activity, of any degree, is not an activity capable of giving rise to the existence of a trade. Nothing in C Ltd.'s activities went beyond the exploitation of its proprietary rights in land.
Warner J.: This is an appeal by the Inspector of Taxes against a decision of the General Commissioners for the Division of Aylesbury. I need not rehearse all the facts, which are set out in the Case Stated. The first question that arises is whether the Respondent Company was an investment company or a trading company. Mr Wilson, who appears for the Respondent Company, conceded that it was an investment company and not as the Commissioners held, a trading company, the sum of £10,403, which is in issue, was not properly deductible from its profits in computing them for the purposes of corporation tax.
The relevant findings of the Commissioners are in these terms. In para. 6(a)(iii) of the Case Stated they say:
The Respondent Company acquired properties, found licensees to occupy them, granted licences, and generally managed the properties. It had disposed of one property in its accounting period ended 31st December 1979 on terms which were said by Mr Bush to have given rise to neither a gain nor a loss.
An example of such a licence granted by the company is to be found...
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