Section 34 of Finance Act 1965–‘Retirement relief’ against capital gains tax–Sale of part of farmland–Not sale of part of farm business–Land only asset of business–Crown wins appeal
This was an
appeal by the Crown from a decision of General Commissioners for Income Tax
that a farmer, Edward Adcock, aged 71, of Brandon Road, Watton, Norfolk, was
entitled to ‘retirement relief’ against capital gains tax under section 34 of
the Finance Act 1965 in respect of the sale of part of the land farmed by him.
Brian
Davenport (instructed by the Solicitor of Inland Revenue) appeared for the
Crown; David Milne (instructed by Daynes, Chittock & Back, of Norwich)
represented the respondent taxpayer.
Giving
judgment, allowing the appeal, Fox J said that in 1973 Mr Adcock sold nearly 5
acres of his farm for £72,000, carrying on farming on the rest of his land. He
was assessed for capital gains tax in respect of the sale, but the
commissioners decided that he was entitled under section 34 of the Finance Act
1965 to relief of £10,000 against the assessment of £64,481. Section 34
provided that where an individual had attained the age of 60 years and disposed
by sale or gift of the whole or part of a business he had owned throughout the
period of 10 years ending with the disposal, then relief was to be given in respect
of his gain. The amount of the relief at the material time was £10,000 if he
had attained the age of 65. On behalf of Mr Adcock it was contended that the
sale of the land constituted a sale of part of the farming business, thus
entitling him to relief. At the time of the sale Mr Adcock had attained the age
of 65 and had owned the farm for more than 10 years.
The
commissioners had said that without the occupation of land there could be no
farming business and disposal of part of the land was ‘disposal of part of the
business.’ That reasoning appeared to
him (his Lordship) to be wrong. It did not follow that a sale of part of the
land constituted a sale of part of the business and the commissioners had
misdirected themselves. The business and the assets of the business were
different things.
Section 34
required the taxpayer to establish a disposal of ‘the whole or part’ of his
business. In ordinary language ‘land’ was not the same thing as a business. It
was merely an asset of the business. There was a clear distinction between the
business and the individual assets used in the business. The mere sale of
farmland was not a disposal of part of the farm business. The sale was merely a
factor which the court had to consider in deciding whether there had been such
a disposal. There was nothing to justify saying that farming was in a special
position. Nothing in the section justified that. It did not suggest that land
was to be treated differently from other assets.
He (his
Lordship) had to decide whether the sale was a part of Mr Adcock’s farming
business. The sale did not constitute a disposal of any part of the
business–the nature of the business, a mixed farming business, was the same
before and after the sale–and he saw no reason for inferring that the sale of
part of the farm was necessarily disposal of part of the farming business. The
only reasonable conclusion on the facts was that there had been a sale of an
asset of the business; that the business continued unaltered; and that no part
of it was disposed of.
Appeal
allowed. The Crown agreed to pay the taxpayer’s costs.
