Retirement relief — Sale of dairy farming business — Sale of milk quota some months later — Claim for relief from capital gains tax on proceeds of sale of milk quota — Whether disposal of whole or part of business — General commissioners holding that farmer entitled to relief sought — High Court allowing appeal by Crown — Sale of milk quota was separate disposal — Not sale of part of business
After a lifetime in dairy farming B decided to give up his business and in March 1988 he sold his entire dairy herd. In February 1989, when B was 60 years old, he sold his milk quota for £54,280. It was common ground that the dairy business ceased to be carried on when the herd was sold. The question arose whether the disposal of the milk quota was “a disposal of the whole or part of a business” so as to attract retirement relief from capital gains tax within section 69 of the Finance Act 1985. B was assessed as to capital gains tax on £54,280 for 1988-89 as a chargeable gain on the disposal of the milk quota. The general commissioners allowed his appeal against that assessment, but the Crown appealed.
Held The appeal was allowed.
1. To obtain retirement relief the taxpayer had to show that there had been a disposal by a sale of the business or a part of the business. A business was, in ordinary language, not the same as an asset used in the business. A distinction had to be drawn between a business and chargeable business assets used for the purpose of the business: see Atkinson v Dancer (1988) 61 TC 598.
2. Where there were two separate disposals which were not part of the same transaction, there was nothing in the legislation which allowed or required such disposals to be treated as one. They were two separate disposals and should be treated separately.
3. In a recent case the sale of farm buildings and yard in October 1988, followed by the gradual sale of cattle, was held to amount to a disposal of the dairy farming business. The court decided that a dairy farmer was entitled to have simultaneous disposals taken together for the purposes of assessing whether a particular disposal could be categorised as a sale of part of the business: see Jarmin (HMIT) v Rawlings [1994] EGCS 185.
4. However in the present case, the commissioners had erred in failing to ask whether the disposal of his milk quota by the taxpayer amounted to a disposal of the whole or part of the business. Had they done so they would have concluded that it was simply the disposal of an asset which had formerly been used in, or was part of, the dairy farming business but that it was not, by itself, the disposal of either the whole or part of that business.
5. The relevant business activity consisted of the production and sale of milk. That activity ceased on the disposal in March 1988 of the herd. The subsequent disposal of another asset did not amount to a disposal of part of the business.
6. The milk quota disposal fell on the Atkinson side of the line. Nor did the sale of quota satisfy the “simultaneous disposal” test in the Jarmin case.
Timothy Brennan (instructed by the Solicitor to the Inland Revenue) appeared for the Crown; John Walters (instructed by Cross Ram & Co, of Halesworth) appeared for the farmer.