Inheritance tax – Business property relief – Agricultural property relief – Personal representatives appealing against refusal of business property and agricultural property reliefs in respect of livery business on deceased’s land – First-tier Tribunal (FTT) allowing appeal – Whether business being wholly or mainly that of holding investments – Whether FTT applying incorrect test – Whether FTT’s conclusion disclosing error of law – Appeal dismissed
The deceased died on 29 May 2012 when she was the sole owner of approximately 30 acres of land known as Gravelly Way livery stables, Penn Bottom, Penn, Buckinghamshire. A DIY livery business was originally carried out on the land but, in 2008, other services were added to the package offered, including the provision of worming products, providing the horses with hay feed during the winter months, removing horse manure from the fields where the horses were kept and undertaking a daily health check of each horse. The deceased did not reside on the land.
When inheritance tax (IHT) fell to be dealt with, the respondent executors claimed business property relief on the ground that the asset constituted “relevant business property” as defined in section 105 of the Inheritance Tax Act 1984 and/or agricultural property relief on the ground that the asset constituted “agricultural property” within section 116 of the 1984 Act. The appellant commissioners issued a determination under section 221 of the 1984 Act to the effect that neither of those reliefs could be claimed, with the result that the sum of £308,990 was not treated as exempt and the aggregate chargeable transfer increased to £904,876.
The FTT allowed the respondents’ appeal against those determinations, holding that the deceased’s livery business did not consist wholly or mainly of making or holding investments and accordingly was “relevant business property” qualifying for business property relief under the 1984 Act: [2017] UKFTT 632 (TC); [2017] PLSCS 173. The appellants appealed.
Held: The appeal was dismissed.
(1) Appeals to the Upper Tribunal were limited to questions of law only, ie whether the FTT made an error of law in its decision which needed to be corrected. More subtle errors of law had been recognised by the courts which strayed away from the area of pure law and into the area of findings of fact. In the present case, in deciding whether the business carried on by the deceased consisted wholly or mainly in making or holding investments, the FTT was carrying out its own multi-factorial assessment, on the basis of the primary facts which it had found. None of the relevant primary facts found by the FTT were disputed by the appellant. It was therefore clear that the Upper Tribunal could only overturn the FTT’s decision if it was satisfied that the FTT applied the wrong legal test, or if it plainly misapplied the correct legal test to the facts which it found: Inland Revenue Commissioners v Fraser [1942] 24 TC 498, Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 and Procter & Gamble UK v Commissioners of Revenue and Customs [2009] EWCA Civ 407 followed
(2) There were parts of the FTT’s decision where it had failed to refer to the “wholly or mainly” requirement in section 105(3) when stating the statutory test. However, on reading the decision as a whole, it was clear that the FTT had had that requirement fully in mind and had explicitly addressed the point in its final conclusion that the business provided a level of valuable services to the horse owners which precluded a determination that the business was mainly one of holding investments. Given the facts of the case as the FTT found them, its conclusion that the business was not “wholly or mainly… making or holding investments” was one which it was entitled to reach. The FTT had applied the correct legal test by considering the business as a whole and all of the services provided to horse owners. It was overstating the position to argue that any business involving exploitation of land should, as a matter of law, be assumed to be wholly or mainly a business of investment unless the taxpayer could establish otherwise. Such an assumption only applied to “owning and holding land in order to obtain an income from it”: Pawson (deceased) v Commissioners of Revenue and Customs [2013] UKUT 50 (TCC); [2013] PLSCS 38 applied.
(3) Deciding whether the particular activities of the deceased amounted wholly or mainly to a business of making or holding investments was an exercise which clearly involved the application of a not altogether precise legal standard to a combination of features of varying importance, as well as a multi-factorial assessment based on a number of primary facts. Therefore, it was clear that the Upper Tribunal should be slow to interfere with the FTT’s decision and not reverse it unless it had erred in principle. The appellants’ criticisms of the FTT’s decision were based either on the presumption that the business was essentially one at the “investment” end of the spectrum, or amounted to an assertion that the FTT had placed inappropriate weight on the factors it had identified when assessing whether the business was wholly or mainly one of making or holding investments. There was not enough in those criticisms to justify any interference with the FTT’s conclusion. There was no clear bright line between businesses which qualified for the relief and those that did not. The FTT applied the correct legal test and the conclusion it reached was one which it was entitled to reach on the basis of the evidence before it. It was irrelevant whether the Upper Tribunal, or another panel of the FTT, might have reached a different conclusion: Designer Guild v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 followed. Commissioners of Inland Revenue v George [2004] STC 147 considered.
Christopher McNall (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the appellants; Patrick Vigne (one of the respondent executors) appeared in person.
Eileen O’Grady, barrister
