Taxpayer of retirement age surrendering protected agricultural tenancy for consideration of £120,000 and thereafter continuing to farm same land as licensee at-will – Whether disposal qualifying for CGTretirement relief
The taxpayer, who was aged over 60 at all material times, operated a 326-acre farm near Milton Keynes, of which 136 acres (the tenanted land) had been held for many years under a protected agricultural tenancy from the Milton Keynes Development Corporation (the landlord). On March 29 1990 the taxpayer surrendered the tenancy for a consideration of £120,000 and on the understanding that he would have a licence (without statutory protection) to continue farming the tenanted land until it was required by the landlord. The taxpayer ceased farming on September 29 1992 and closed his business on April 5 1993. It was common ground that if the taxpayer was not entitled to retirement relief, under section 69 of the Finance Act 1985, he would incur CGT liability on a chargeable gain of £46,672. Having been assessed on the basis that such relief was not available, the taxpayer appealed to the general commissioners who allowed his appeal. The Revenue appealed by way of case stated to the High Court.
Held The Revenue’s appeal was allowed.
1. Under section 69(2), and subject to certain conditions which were otherwise satisfied by the taxpayer, relief was available where the disposal of business assets was either, under para (a), a disposal of the whole or part of the business; or, under para (b), a disposal within one year of cessation of business of one or more assets used for that business at the date of cessation. Since the business had not ceased at the time of the relevant disposal, the claim could only be founded, if at all, under para (a).
2. While accepting that para (a) was not limited to disposals on a going concern basis (see Pepper v Daffurn (1993) 66 TC 68), the Revenue had correctly contended that, in order for the paragraph to apply to the disposal of an asset, it had to be asked whether the change, if any, occasioned by the disposal had as a matter of fact caused a cesser of the business wholly or in part: see Atkinson v Dancer, Mannion v Johnson (1988) 61 TC 598. The commissioners had misdirected themselves by asking whether the surrender had led to a position that was wholly different from that obtaining before the surrender. The fact that the future of the business, so far as subsequently conducted on the tenanted land, had become precarious did not mean that the taxpayer had made a disposal of any part of his business.
Timothy Brennan (instructed by the solicitor to the Inland Revenue) appeared for the appellant tax inspector; the respondent taxpayer appeared in person.