Analysis
The appellant was the executor of Alfred Buller. On Mr Buller’s death there was a transfer of value of 25,000 shares in Bullick Developments (1986) Ltd (the company). The company owned and managed the Valley Business Centre (the business centre). HMRC determined pursuant to s221 Inheritance Tax Act 1985 (the IHTA 1985) that the shares in the company were not relevant business property for the purposes of s104 IHTA 1984, having regard to s105(3) IHTA 1984, which prevents inter alia shares in a business whose activities mainly or wholly consist of holding of making investments from being relevant business property.
The tribunal found various facts about the nature of the business carried on by the company. These included that the business centre provided industrial, warehouse and office space for a number of occupiers; there was little turnover of occupiers; about 15 per cent of the space was let to one company as self-contains offices; apart from that 15 per cent another 10 per cent was used as offices; approximately 400 people were in or around the business centre of a typical working day; the deceased spent a lot of time at the site and it was necessary to employ an administrator after his death; businesses occupying did so on standard form licence agreements.
A service charge was charged to the occupiers. The charge was broken down into two parts, which both itemised various services offered and charged for. It was common ground that many such services were standard services provided by a landlord to occupiers. Among the other services were the provision of a forklift truck; boardroom hire, secretarial services, stationery provision; car parking; receptionist provision.
The appellant submitted that owing to the services provided, the business was not one of mainly or wholly holding investments. Further, owing to the unusual nature of the site the land would not be usable to generate much, if any, income without the provision of the forklift truck. The respondents submitted that a forklift service would fall within services which would normally be provided by a property investment business.
Held:
- 1) There were now many authorities in the context of land which consider the question of whether a business is mainly or wholly one of holding assets. The most important of these is IRC v George (exors of Steadman decd) [2003] EWCA Civ 1763. The tribunal noted that there was no real disagreement between the parties as to the correct test to be applied but derived and listed various principles to be applied in the decision.
- 2) The question was one of fact and degree, to be decided on the basis of the evidence. It is necessary to look at the business in the round and in doing so the relative income or profits generated by the respective parts of the business is relevant but not determinative.
3) On the facts, the non-investment type services provided include the forklift and the office-type facilities. These services did not predominate in the activities of the company as a whole. The real nature of the business was a property investment business. Most of the additional income came from the recharge to occupiers of electricity, telephone, and postage charges. The income from the other services was very modest compared to the licence fee income. The business centre was well towards the investment end of the spectrum. The shares in the business were not relevant business property.
JUDGMENT JONATHAN CANNAN: Background [1] Alfred William Buller deceased (the deceased) died on 1 December 2007. At the time of his death there was a deemed transfer of value for the purposes of inheritance tax of property including 25,000 shares in Bullick Developments (1986) Ltd (the company). [2] The company owns and manages the Valley …Continue reading "Best v HMRC"