Williams v Merrylees
| Jurisdiction | England & Wales |
| Judgment Date | 23 June 1987 |
| Date | 23 June 1987 |
| Court | Chancery Division |
Chancery Division.
Mr. Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
The taxpayer appeared in person.
Before: Vinelott J.
The following cases were referred to in the judgment:
Batey (H.M.I.T.) v. Wakefield TAX(1981) 55 T.C. 550
Markey (H.M.I.T.) v. Sanders TAX[1987] BTC 176
Capital gains tax - Exemption - Private residence - Lodge situated 200 metres from house and occupied by gardener - Whether part of residence for purposes of exemption - Capital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, sec. 101.
This was an appeal by the Crown from the decision of General Commissioners that a lodge in the grounds of the taxpayer's house qualified for exemption from capital gains tax as part of his residence.
The taxpayer owned a small country house with four acres of land. Situated in the grounds some 200 metres from the main house was a lodge occupied by a gardener employed by the taxpayer. In 1975 the taxpayer sold the main house with most of the land but retained the lodge with a small area of land, where the gardener continued to live until his death in 1979. The taxpayer then sold the lodge to the purchaser of the house.
The taxpayer claimed that a proportion of the gain accruing on the sale of the lodge, corresponding to his period of ownership of the house, should be exempt from capital gains tax by virtue of theCapital Gains Tax Act 1979 section 101Capital Gains Tax Act 1979, sec. 101.
The Crown appealed to the High Court from a decision of General Commissioners who found that the lodge was part of the taxpayer's residence. The Crown submitted that if a taxpayer contended that a separate building in which he did not actually reside was part of the dwelling-house which was his main residence, he had to establish first that the occupation of the separate building increased his enjoyment of the main building, and second that the separate building was very closely adjacent to the main building. Here, the first condition was satisfied but, having regard to the layout of the buildings, the second was not.
Held, dismissing the Crown's appeal:
1. A single test was to be applied in deciding whether a separate building should be considered part of a dwelling-house. That was whether the building was appurtenant to and occupied for the purposes of the residence, so that there was an entity which could sensibly be described as a dwelling-house, though split up into different buildings performing different functions. In deciding whether that test was satisfied on the facts the Commissioners had to look at all the circumstances: the propinquity or otherwise of the buildings having regard to their scale was an important factor, but it was not simply a question of measuring distance and of scale, regard must be had to the layout and other characteristics as a whole; it was not right to isolate a single factor as one which had to be present. (Batey (H.M.I.T.) v. WakefieldTAX(1981) 55 T.C. 550, followed.)
2. The question was one of fact and degree for the Commissioners. On the facts of this case it would be wrong to interfere with their decision; it could not be said that it was inconsistent with the true and only conclusion to be drawn from the facts.
1. At a meeting of the General Commissioners for the division of Truro held at the offices of Carrick District Council, Truro, Cornwall on 20 November 1986, Walter Richard Krebs Merrylees ("the taxpayer") appealed against: (1) an assessment to capital gains tax for the year ending 5 April 1980 in the sum of £21,000 in respect of the disposal of Elm Lodge, Copthorne, Sussex on 22 June 1979, and (2) a determination given by H.M. Inspector of Taxes under the Capital Gains Tax Act 1979 section 101 subsec-or-para (5)Capital Gains Tax Act 1979, sec. 101(5)(b), that from 2 February 1976 the taxpayer's only or main residence was 2 Shute Meadow, Portscatho, Truro, Cornwall.
2. Shortly stated, the questions for determination were:
(2) Whether Elm Lodge was at any time part of the taxpayer's only or main residence and if so at what times.
(3) Whether Elm Lodge was the taxpayer's only or main residence from 2 February 1976 to 22 June 1979.
3. Evidence was given by the taxpayer and by Mrs. Merrylees, his wife.
4. [Paragraph 4 listed the documents admitted before the Commissioners.]
5. The following facts were admitted or proved:
(2) The taxpayer was a barrister of Gray's Inn, London until 1980 when he retired.
(3) Following the expiration of a long lease of the property, the taxpayer purchased on 25 October 1956 for £3,875 the freehold of Elm House, Copthorne, Sussex, together with Elm Lodge and approximately four acres of garden and land.
(4) At the time that the taxpayer purchased the property, Elm Lodge was occupied by Mr. and Mrs. Langridge. Mr. Langridge had been employed by the previous occupant of Elm House as a resident gardener/caretaker/handyman and Mrs. Langridge had been employed as a domestic help. The taxpayer continued to employ Mr. and Mrs. Langridge in the same manner as the previous occupants and Mr. and Mrs. Langridge continued to live at Elm Lodge.
(5) Elm House was built in about 1850 and comprised an entrance and staircase hall, two (formerly three) reception rooms, four bedrooms, a dressing-room/study, bathroom, stabling and other outbuildings. Elm House was linked to the public highway by a vehicular drive leading to Effingham Road and linked to Effingham Lane by an alternative access running alongside Elm Lodge.
(6) Elm Lodge is a bungalow and it was built many years ago possibly at the same time as Elm House. It comprised four main rooms, a kitchen scullery, bathroom with W.C., and fronts onto and has access to the public highway at Effingham Lane. At all material times Elm House and Elm Lodge were rated together for the purposes of general and water rates and electricity was formerly supplied to Elm Lodge by a private wire from Elm House. Both Elm Lodge and Elm House were supplied by the same water main which entered the property from Effingham Lane.
(7) Mrs. Langridge continued as a domestic help at Elm House until she became ill and died in 1969, and Mr. Langridge continued to live at Elm Lodge and to carry out his duties until his death in 1979.
(8) In 1968 the taxpayer purchased the property 2 Shute Meadow, Portscatho, Truro, Cornwall as a holiday home.
(9) On 31 December 1975 the taxpayer sold Elm House together with most of the land and retained Elm Lodge and an area of less than one acre of garden. Elm Lodge was retained by the taxpayer to ensure that Mr. Langridge could not be evicted and also to preserve a home for the taxpayer and his wife should they find that they did not enjoy living in Cornwall. Mr. Langridge continued to act as a caretaker for Elm Lodge and to maintain the garden and land retained with Elm Lodge, including maintaining the orchard and beehives on the land. The taxpayer permitted the purchaser of Elm House to use a pedestrian access from Effingham Lane alongside Elm Lodge to Elm House and the taxpayer also granted a first refusal to the purchaser of Elm House to purchase Elm Lodge in the event of the taxpayer wishing to sell the same at a price to be negotiated.
(10) Following the sale of Elm House the taxpayer and his wife moved on 2 February 1976 to Shute Meadow, Portscatho where most of their time was spent, although the taxpayer continued occasionally to travel to London in connection with his practice and his duties as a deputy judge of the County Court. The taxpayer did not stay at Elm Lodge on these occasions, but would occasionally visit Elm Lodge.
(11) Mr. Langridge died early in 1979 and within a week of his death the purchaser of Elm House approached the taxpayer to see whether the taxpayer then wished to sell Elm Lodge, but the taxpayer and his wife were still uncertain whether or not they still wished to retain Elm Lodge as a possible home for themselves. They eventually decided that they no longer wished to retain Elm Lodge as a possible home and on 22 June 1979 the taxpayer sold Elm Lodge together with its remaining garden to the purchaser of Elm House for a net figure of £33,860.
(12) In 1980 the taxpayer retired as a barrister and shortly afterwards ceased to sit as a deputy judge.
(13) The distance from Elm House to Elm Lodge is approximately 200 metres.
6. The taxpayer contended that:
(i) Elm Lodge and the land sold with it was part of his only or main residence from its acquisition on 25 October 1956 until the disposal of Elm House and its grounds on 31 December 1975.
(ii) In the absence of an election to the contrary Elm Lodge and the land sold with it was his only or main residence from 2 February 1976 to 22 June...
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