Yuill (Original Appellant and Cross-Respondent) v Wilson (Inspector of Taxes) (Original Respondent and Cross-Appellant)
| Jurisdiction | England & Wales |
| Judge | Viscount Dilhorne,Lord Salmon,Lord Edmund-Davies,Lord Russell of Killowen,Lord Keith of Kinkel |
| Judgment Date | 10 July 1980 |
| Judgment citation (vLex) | [1980] UKHL J0101-1 |
| Date | 10 July 1980 |
| Court | House of Lords |
[1980] UKHL J0101-1
House of Lords
Viscount Dilhorne
Lord Salmon
Lord Edmund-Davies
Lord Russell of Killowen
Lord Keith of Kinkel
My Lords,
The appellant, Mr. Cecil Mortley Yuill, was assessed to income tax under Case VI of Schedule D in the sum of £1,129,800 for 1973/74. He appealed to the General Commissioners at Hartlepool and during the hearing of his appeal, the Revenue contended that that figure should be adjusted to £1,095,853.
The assessment was made under section 488 of the Income and Corporation Taxes Act 1970, the relevant provisions of which read as follows:—
"(1) This section is enacted to prevent the avoidance of tax by persons concerned with land or the development of land.
(2) This section applies wherever—
( a) land, or any property deriving its value from land, is acquired with the sole or main object of realising a gain from disposing of the land, or
( b) land is held as trading stock, or
( c) land is developed with the sole or main object of realising a gain from disposing of the land when developed,
and any gain of a capital nature is obtained from the disposal of the land—
(i) by the person acquiring, holding or developing the land, or by any connected person, or
(ii) where any arrangement or scheme is effected as respects the land which enables a gain to be realised by any indirect method, or by any series of transactions, by any person who is a party to, or concerned in, the arrangement or scheme;
and this subsection applies whether any such person obtains the gain for himself or for any other person.
(3) Where this section applies, the whole of any such gain shall for all the purposes of the Tax Acts be treated—
( a) as being income which arises when the gain is realised, and which constitutes profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the gain is realised, and
( b) subject to the following provisions of this section, as being income of the person by whom the gain is realised.
(4) For the purposes of this section …
(5) For the said purposes—
( a) where, whether by a premature sale or otherwise, a person directly or indirectly transmits the opportunity of making a gain to another person, that other person's gain is obtained for him by the first-mentioned person, and
( b) any number of transactions may be regarded as constituting a single arrangement or scheme if a common purpose can be discerned in them, or if there is other sufficient evidence of a common purpose.
(6) For the purposes of this section such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land, and allowing only such expenses as are attributable to the land disposed of, and in applying this subsection …
(7) …
(8) If all or any part of the gain accruing to any person is derived from value, or an opportunity of realising a gain, provided directly or indirectly by some other person, whether or not put at the disposal of the first-mentioned person, subsection (3) ( b) of this section shall apply to the gain, or that part of it, with the substitution of that other person for the person by whom the gain was realised.
(9) …
(10) …
(11) …
(12) …
(13) This section shall apply to all persons, whether resident in the United Kingdom or not, if all or any part of the land in question is situated in the United Kingdom."
This section, which has the marginal note "Artificial transactions in land" is in Part XVII of the Act which is headed "Tax Avoidance".
Section 489 supplements section 487 (which dealt with the sale by an individual of income derived from his personal activities) and section 488. Subsection (13) of that section reads as follows:—
"For the purposes of the principal sections and this section—
'capital amount' means any amount, in money or money's worth …
'company' includes any body corporate,
'share' includes stock,
and for the said purposes any amount in money or money's worth shall not be regarded as having become receivable by some person until that person can effectively enjoy or dispose of it."
Some 50 years ago Mr. Yuill founded what is now a large and prosperous building business in Hartlepool. For many years the business was carried on by a company called Cecil M. Yuill Ltd. (hereafter referred to as 'Yuill') and until about 1965 he was its managing director. He was succeeded in that office by a younger man but he continued to take an active interest in the affairs of the company and to play a part in it, and did so at the time of the transactions which led to the assessment being made on him. He is a substantial shareholder in the company and a substantial number of shares in it are held by family trusts for the benefit of his family. The combined shareholdings constitute a controlling interest.
Owton Fens Development Co. Ltd. (hereafter called 'the Development company') was formed in 1972 to hold and acquire land for Yuill. The appellant's four children were shareholders and the appellant and Mr. Grieveson, who was also a director of Yuill, were directors.
In 1966 Yuill had agreed to buy 108 acres of land known as Quarry Farm for £194,400. The purchase of a quarter of that land for £48,600 was to be completed by the 31st March 1972 and the purchase of the remaining three-quarters was to be completed on later dates.
On the 10th May 1972 on the direction of Yuill the first quarter was conveyed to the Development company for £48,600.
Owton Fens Properties Ltd. (hereafter called the 'Property company') was another company associated with Yuill. The appellant, his wife and the trustees of a family settlement set up by the appellant were its shareholders and the appellant and his wife were directors with Mr. Grieveson its secretary. It was formed to take over from Yuill 67 acres of land at Owton Fens Farm and did so in March 1961 for the sum of £4,050. This case is concerned with 48 acres of this land.
Between 1955 and 1962 the appellant created 4 settlements for the benefit of members of his family, reserving to himself power to appoint new trustees. In 1973 he exercised that power in relation to three of the settlements, appointing as trustees thereof Mr. de Putron, Mr. M. J. Wilson and Channel Executor and Trustee Co. Ltd. (later known as Hillcrest Executor and Trustee Co. Ltd.). These new trustees have at all times resided in Guernsey. Each trust held a large number of shares in Yuill.
On the 20th September 1972 the appellant made a fifth settlement for the benefit of members of his family. Its trustees were Mr. de Putron and a Mr. Bagley, also a resident in Guernsey. These trustees formed two companies in Guernsey named Mayville Ltd. and Ceville Ltd. All the shares in those companies were trust property and Mr. and Mrs. Bagley were directors of the companies of which the trustees had complete control. The Commissioners said that the companies "were merely a legal vehicle to be used by and on behalf of the trustees so as to limit the liability of the trustees should anything go wrong …"
On the 28th December 1972 the Property company sold its 48 acres to Ceville Ltd. for £40,000 and on the 25th March 1974 Ceville sold them to Yuill for £700,000.
On the 30th January 1973 the Development company sold to Mayville Ltd. the quarter of the land at Quarry Farm which had been conveyed to it for £81,000 and Mayville bought from Yuill its rights in relation to the remaining three-quarters. On the 30th March 1973 and on the 25th March 1974 Mayville bought two more quarters, each for £48,600. On the 23rd March 1974 Mayville sold three-quarters of that land to Yuill for £648,000 and on the 25th March the three-quarters were conveyed to Yuill.
So of the Quarry Farm land which Yuill had agreed to buy for £194,000, the three-quarters of which had been sold to Mayville for £178,200 again became the property of Yuill at a cost of £648,000 and the 48 acres which Yuill had held, again became its property for £700,000.
The Revenue contended that by virtue of section 488 the gains made by Ceville and Mayville on the sale of these lands were to be treated as income of the appellant. It was not disputed that the appellant and the Yuill companies were concerned either directly or indirectly with land and its development and the Commissioners found that Ceville and Mayville acquired the lands with the sole or main object of realising a gain from the disposal of them, so subsection (2) of the section applies if any gain was 'obtained' from the disposal either (i) by the person acquiring the land or by any connected person or (ii) where any arrangement or scheme enabled a gain to be realised, by any person who was a party to or concerned in the arrangement or scheme; and the subsection applies whether that person 'obtains' the gain for himself or for any other person.
The Commissioners found that there was a scheme or arrangement or a series of transactions which enabled capital gains to be made by Mayville and Ceville upon the sale of the lands to Yuill and that the appellant
"either directly or through his companies, and with the help of his Guernsey trustees obtained for those companies the said gains …."
They thus held that the case came within (ii) of subsection (2) and they upheld the assessment.
The appellant's appeal was heard by Templeman J., as he then was. There it was argued for the appellant, as it was in the Court of Appeal, on each occasion without success, and it was contended in this House that the sales to Ceville and Mayville were at market value and that this prevented the section from applying. If this submission was well founded, a sale at market value in...
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