Retirement relief — Sale of farm land and business assets — Whether disposal of whole or part of business — General Commissioners holding taxpayer disposed of dairying part of business — Entitlement to relief sought — High Court dismissing appeal
The taxpayer disposed of land and buildings at Baldham Mill Farm, Wiltshire. Prior to the disposal the farm consisted of a milking parlour, yard, hay barn, implements shed, cattle shed and approximately 64 acres of land. At the time of the sale the taxpayer owned a dairy herd of 34 cows. The taxpayer employed a full-time farm labourer from 1982 until January 1989. There were no other milking facilities on the residue of the farm. In October 1988 the taxpayer sold at auction the milking yard, parlour, storage barn and riverside pasture (a total of approximately 1.2 acres of land). Vacant possession was given on January 27 1989. Thus, he ceased the dairy side of his business. To resume dairying would involve the erection of new buildings and parlour and that would entail obtaining a number of permissions from the local authority and the Ministry of Agriculture etc, which might not be forthcoming. The milk quota had not been sold because the remainder of the land would eventually sell better if it had milk quota attached to it. After the disposal the dairy herd was looked after by the taxpayer’s sister on her farm while arrangements were made for its sale. An assessment to capital gains tax was made in respect of the sale in the sum of £100,000.
A question arose whether the sale was merely the disposal of business assets; or whether it constituted the sale of part of the business entitling the taxpayer to relief from CGT under section 69 of the Finance Act 1985 (“retirement relief”). The General Commissioners took the view that there was a disposal of a part of a business so that the taxpayer was entitled to retirement relief. The Revenue appealed to the High Court arguing that it was only permissible to have regard to what happened at the time of the disposition, ie the date of the auction in October 1988. On that date all that was disposed of was the milking parlour and yard. The cattle, milk quota and the grazing land was not disposed of and on that basis it was impossible to find that part of a business, as opposed to an asset of the business, was disposed of. On the other hand, the taxpayer argued that the proper subject of inquiry was what was disposed of when the transaction took effect, ie after completion on January 29 1989.
Held The appeal was dismissed.
1. For the purposes of obtaining retirement relief the critical factor was that a business connoted an activity: see McGregor v Adcock [1977] 242 EG 289.
2. The activity here was the production and sale of milk, it ceased at completion so far as the taxpayer was concerned. The sale of the milking parlour was a vital ingredient in that cessation.
3. On the facts found by the Revenue it was open to them to conclude that the sale by auction and completion of the sale of the milking parlour and yard coupled with the cessation at completion of all milking operations for the taxpayer’s benefit amounted to a disposal by him of his dairy farming business.
Timothy Brennan (instructed by the solicitor to the Inland Revenue) appeared for the Inspector of Taxes; David Ewart (instructed by Winterbothams, of Stroud) appeared for the taxpayer.
