Weston v Commissioners of Inland Revenue

JurisdictionEngland & Wales
Judgment Date10 November 1999
Date10 November 1999
CourtSpecial Commissioners

special commissioners decision

MR T H K EVERETT (SPECIAL COMMISSIONER)

Weston (as Executor of the Will of Weston Deceased)
and
Commissioners of Inland Revenue
DECISION

MR T H K EVERETT: "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" (see Inheritance Tax Act 1984 section 104 section 105 subsec-or-para (1)s.104 and 105(1)(a) of the Inheritance Act 1984 ("the 1984 Act")). Inheritance Tax Act 1984 section 105 subsec-or-para (3)Section 105(3) excludes from the category of relevant business property, among other things, a business that consists wholly or mainly of making or holding investments. Inheritance Tax Act 1984 section 105 subsec-or-para (3)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 building or making or holding investments.

Mr Johnny Harry Baden Weston ("Mr Weston") appeals against a determination dated 18 January 1999 of the Commissioners of Inland Revenue in respect of a transfer of value deemed to have been made on the death of his mother Mrs Doreen Margarita Weston ("the Deceased") on 27 December 1993. The notice of determination provided:

The Commissioners of Inland Revenue have determined - in relation to -

1. The deemed disposal for the purposes of inheritance tax on the death on 27 December 1993 of Mrs Doreen Margarita Weston ("the Deceased")

2. The holding of 1801 £1 ordinary shares in Fowley Mead Park Ltd ("the Company") which formed part of the estate of the Deceased at her death

That having regard to the provisions of Inheritance Tax Act 1984 section 105 subsec-or-para (3)section 105(3) Inheritance Tax Act 1984 that holding of shares in the Company was not relevant business property for the purposes of Inheritance Tax Act 1984 section 104 subsec-or-para (1)section 104(1) of that Act.

The sole issue before me in this appeal is whether the business of the Company at the date of the Deceased's death consisted wholly or mainly in the making or holding of investments.

The evidence before me consisted of a statement of agreed facts, a large bundle of documents prepared by the Appellant, including numerous photographs of the caravan site at Fowley Mead Park, and the oral evidence of Mr Weston and of his accountant Mr Lilesh Shah, CA. A written statement was provided for Mr Weston which served as his evidence in chief. At the conclusion of the hearing a Video cassette prepared by the Appellant shortly before the hearing and showing the caravan site at Fowley Mead Park was viewed as part of the evidence. The screening of the Video cassette lasted for some twenty minutes.

The facts

1. The Deceased died on 27 December 1993 a widow. Mr Weston is the Deceased's only child.

2. At the date of the Deceased's death her estate included, amongst other things, 1801 shares in a limited company Fowley Mead Park Ltd ("the Company"). This represented 90% of the issued share capital of that company at that date.

3. The business of the company throughout the six accounting periods ending 31 March 1989 to 31 March 1994 inclusive consisted of or included the following:

(a) the purchase and sale of caravans

(b) the sale of caravans for commission on behalf of the owners of the same

(c) the grant of the right to pitch caravans on the caravan pitches of the Fowley Mead Caravan Park ("the Park") for a consideration consisting of the pitch fees

(d) the maintenance and administration of the Park and the provision and maintenance of the facilities relating thereto

(e) the supply, for a consideration, of the electricity (and some bottled gas) used by the pitch holders at the Park

4. The Park was situated a short distance to the north of the M25 Motorway at Waltham Cross, Hertfordshire. On two sides it adjoined warehouses and light industrial premises. On the third side it adjoins a playing field whilst on the fourth side trees lined the bank of the River Lea and screen the Park from a small residential development on the far side of the river. The house occupied by the Deceased at the time of her death and which is now the residence of Mr Weston and his family, forms part of the Park and is situated near its entrance.

5. The Park is entirely residential. It does not accommodate touring caravans or caravan rallies. From the photographs and the Video cassette provided the impression is given that the Park forms a suburban residential development in miniature. The caravans do not have the appearance of touring caravans: they give more the appearance of small neat bungalows having tiled roofs. Although they have wheels, those wheels are concealed.

6. Each caravan has a small garden and the Park is plentifully supplied with attractive shrubs. The line of trees mentioned above skirts the bank of the River Lea running down one side of the Park.

7. Each caravan is supplied with mains water, mains drainage and mains electricity. There is no mains gas supply but some caravan owners use bottled gas, purchased from the Company. Some caravan owners have installed telephones.

8. The caravans are owned by their occupiers who pay a rental known as a pitch fee to the Company for the privilege of siting their caravans in the Park and enjoying its facilities. There is no shop or social club at the Park such as may be found on other caravan parks but each caravan owner has the use of a brick built laundry/store room. These are owned and maintained by the Company at its own expense and are viewed by Mr Weston as a unique facility.

9. It is company policy to sell caravans only to prospective purchasers who are 50 years of age or more. The ownership of cats and dogs is prohibited and caravan owners are permitted to park only one car within the Park boundaries. They are also required to subscribe to a list of rules in addition to compliance with the provisions of the Mobile Homes Act 1983.

10. Residents are not permitted to purchase their caravans from an outside source. Either they are purchased from the Company or from another resident, usually through the good offices of the Company, which takes a commission on the occasion of sales between residents. Mr Weston said in evidence:

Although there is nothing in law to prevent the owner of a caravan from moving their caravans from the Park, in practice no owner has ever done so. Instead they invariably sell their caravans to Fowley Mead Park Ltd on leaving or ask the Company to sell the caravan to a purchaser approved by the Company on commission.

11. Occasionally a caravan which is sold to the Company by a resident on leaving (or dying) will be in very poor condition owing to its age. Having purchased it the Company will dispose of it for scrap value and await the arrival of a new van with a new resident.

12. In 1993 there were 96 caravan pitches in the Park of which 90 were occupied.

13. The Company has never advertised the Park and usually has a waiting list of prospective purchasers hoping to take up residence.

14. During the six years prior to the death of the Deceased in 1993 there were three full-time employees of the Company. They were: The Deceased, a director of the Company, who dealt with the financial aspects of running the business and its administration.

Mr Leslie Cole, who was the Park manager and a director of the Company. He died on 6 December 1993 having been ill with Cancer for about a year before he died. Until 1992 he was an extremely fit and active man who lived with his wife in one of the mobile homes in the Park. His wife also died in August 1993.

Mr Weston, who was 27 years old at the time of his mother's death and had spent 10 years employed at the Park. He grew up there and began his career by helping out in his school holidays as a child. Until his mother's death he had very little contact with the administration or financial arrangements of the business, being concerned with maintenance and the day to day problems of running the Park.

15. As a residential Park there was not the turnover of occupants to be found, for example, in a holiday caravan park or a touring park. Much depended on the ages of the residents and inevitably with a retired or semi-retired population deaths would occur from time to time, whilst others would leave the Park for sheltered accommodation. In the earlier years there were no sales on commission, on the evidence of Mr Weston, and the numbers of sales fluctuated from year to year. In 1991 there were five sales of new caravans by the Company and five sales on commission. In 1992 there were eighteen sales of new caravans and four sales on commission. In 1993 there were seven sales of new caravans and two sales on commission.

16. Mr Weston was obviously very proud of the Park and the way that it was run. He said in evidence:

My mother, Mr Cole and I took great pride in running the Park. It has its own "unique" environment, somehow separate from the outside world. It was a very "hands-on" run business, carrying out a wide range of activities (a list follows shortly) and provided a good level of service to our residents, making it a peaceful, safe and secure place to live with people of a similar age and character.

17. The value of the Park at the relevant date was approximately £700,000.

18. Mr Weston's evidence was that between the three employees of the Company, who worked an average total of 148 hours per week, 111 of those hours would be spent on park maintenance and the balance of 37 hours was spent on sales activities. As previously stated Mr Weston confirmed in re-examination that...

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3 cases
  • Weston v Commissioners of Inland Revenue
    • United Kingdom
    • Chancery Division
    • 17 November 2000
  • Commissioners of Inland Revenue v George and Another
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 5 December 2003
    ...of services was not put forward in any of the previous cases before the Special Commissioners, and the attempt to put it forward on appeal in Weston did not succeed. In Powell [1997] STC (SCD) 181 a long-term caravan business was held to be the business of holding investments but the site w......
  • Commissioners of Inland Revenue v George and Another
    • United Kingdom
    • Special Commissioners
    • 15 July 2002
    ...In Furness v IR Commrs SCDUNK(1999) SpC 202; [1999] STC (SCD) 232 (in relation to the long-term caravans), andWeston v IR Commrs SCDUNK(1999) SpC 222; [2000] STC (SCD) 30 it was assumed that the residential caravan business was that of holding investments and the issue was whether this was ......

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