Farmer sold part of farm land — Retirement relief granted — Retained land subsequently sold for development — Whether sale was disposal of part of business notwithstanding farming had ceased two years prior to sale — General Commissioners holding that taxpayer entitled to retirement relief on subsequent sale — High Court allowing appeal against that decision — Judgment for the Revenue
The taxpayer was a farmer who was over 60 years old. He farmed 113 acres of land at Princes Farm, Aston Somerville, Broadway, Worcestershire, until September 1986 when he sold 83 acres including the farmhouse. He was given retirement relief from capital gains tax in respect of the gain made on that sale. He retained 30 acres including a covered cattle yard which was considered to have development potential. The taxpayer bought and reared young calves, keeping them for about two years, over wintering in the covered cattle yard, without which it would have been impossible to rear calves. Significant numbers of calves were last purchased during the autumn of 1985. During 1986 and 1987 the herd was run down in anticipation of obtaining planning permission for development of the covered yard.
In 1986 and 1987 he purchased older animals which could be wintered outside and kept for about one year. He thereafter continued to farm on a much reduced scale. He obtained planning permission for the yard in September 1987 and it was sold in September 1988. The taxpayer appealed against the refusal by the tax inspector of his claim for retirement relief in respect of the gain realised on the disposal of the covered yard. The question was whether the sale of the yard constituted the disposal of part of the taxpayer’s business in order to qualify for retirement relief under section 69(2)(a) of the Finance Act 1985. Section 69(2)(a) provided that relief from capital gains tax should be given in any case where a material disposal of the whole or part of a business was made by an individual who at the time of disposal had attained the age of 60. The General Commissioners found as a fact that the rearing of calves was fundamentally different from grazing store cattle and that the sale of the covered yard caused a change in the taxpayer’s activities. They therefore allowed the taxpayer’s appeal. The Revenue appealed.
Held The appeal was allowed.
1. The taxpayer had in mind to sell the land at an advantage when planning permission was obtained and he changed the nature of his business so that he no longer required the land in question for the purpose of his business. Having obtained planning permission, he sold the land. To categorise the sale of the land in those circumstances as the sale of part of the business seemed to be the antithesis of the true position. The land in question was no longer required for the purposes of his business when he disposed of it and it could not be said that the sale caused the change in the business.
2. There was no reason to interfere with the Commissioner’s finding that the change from the rearing of calves to grazing store cattle was a fundamental change. However, since the change predated the sale it could not be said that the sale had cause the change.
3. The fundamental nature of the change did not affect the only true and reasonable conclusion on the facts that the sale of the covered yard was not a disposal of part of the taxpayer’s business within section 69(2)(a).
Timothy Brennan (instructed by the Solicitor for the Inland Revenue) appeared for Mr Pepper (HMIT); Alun James (instructed by Cox & Hodgetts, of Evesham) appeared for the taxpayer.