Inheritance tax - transfer of value - business property exemption applicable to caravan site

Inland Revenue Commissioners v George and Another: CA (Lady Justice Hale and Lord Justice Carnwath): 5 December 2003

The taxpayers were the executors of the will of S, deceased, a majority shareholder in a company that owned land on which it ran, and provided services for, a caravan/mobile homes site.

The company received site fees from the owners of caravans and charged them for the supply of services.

It employed a manager and also ran a country club and caravan storage business on its land.

The taxpayers' claim for exemption from inheritance tax on the transfer of the shareholding was upheld by a special commissioner on the ground that the exemption for 'relevant business property' provided by sections 104(1) and 105(3) of the Inheritance Tax Act 1984 applied.

An appeal by the Inland Revenue was allowed by a judge ([2003] STC 468).

The taxpayers appealed.

Mark Herbert QC and Robert Argles (instructed by Birkett Long, Colchester) for the taxpayers; Hugh McKay (instructed by the Solicitor, Inland Revenue) for the Revenue.

Held, allowing the appeal, that sections 104 and 105(3) of the 1984 Act operated to exclude from the exemption a transfer of shares in a business carrying on a business, consisting wholly or mainly of making or holding investments; that whether or not a company carried on such a business was essentially an issue of fact; and that accordingly, in the absence of any error of law, it was not open to the judge hearing the Revenue's appeal to upset the determination of the special commissioner that the transfer of the shares qualified for 100% business relief.

VAT - non-monetary consideration - value of part-exchanged vehicle price agreed between parties for commercial reasons rather than market value

Lex Service plc v Customs and Excise Commissioners: HL (Lord Nicholls of Birkenhead, Lords Steyn, Hoffmann and Millett, and Lord Walker of Gestingthorpe): 4 December 2003

When a customer considering the purchase of a car from the taxpayer company wished to trade in his existing car in part-exchange, the company would offer him its estimated market value ('the true value'), but if the customer wanted more it would often offer a higher price to secure the business.

However, if the customer exercised his right to return the replacement car within 30 days, he would be entitled to a refund in respect of the part-exchange car limited to its true value.

Initially, the company paid VAT on its sales on the basis that the monetary equivalent of part-exchange cars was the full price allowed, but it subsequently submitted a claim for repayment on the basis that the monetary equivalent was the 'true value'.

The claim was rejected by customs.

The company's appeals were dismissed by the VAT and duties tribunal, the High Court and the Court of Appeal.

The company appealed.

Kevin Prosser QC and James Henderson (instructed by KLegal) for the company; Kenneth Parker QC and Ian Hutton (instructed by the Solicitor, Customs and Excise) for Customs and Excise.

Held, dismissing the appeal, that the 'subjective value' of a non-monetary consideration was the value which the parties to a transaction had overtly agreed and adopted and attributed to the goods in question; that, accordingly, the value of a part-exchange car was the full part-exchange price specifically agreed by it for commercial reasons rather than its 'true value', which served the different purpose of limiting any refund which might be made; and that the part-exchange price could not be re-characterised as being in part a discount on the price of the replacement car.

(WLR)

Commissioners forfeiting car and goods imported without payment of duty - tribunal deciding to restore car on basis of evidence that goods bought for importer's private use - importer entitled to rely on 'private use' when seeking discretionary restoration of goods

Customs and Excise Commissioners v Dickinson: ChD (Mr Justice Peter Smith): 15 November 2003

On his return from mainland Europe, customs officers seized the importer's car and an amount of tobacco and alcohol, since no duty had been paid on the goods.

After the decision to seize the car and goods had been given to him in writing, the importer sought restoration of the car.

A customs review officer then affirmed the decision to seize.

The importer's appeal to the VAT and duties tribunal was allowed on the basis that in the light of evidence that the goods had been purchased for his own use the forfeiture should not have occurred.

The Customs and Excise Commissioners appealed.

Nicola Shaw (instructed by the Solicitor, Customs and Excise) for the commissioners; Howard Smith (instructed by Bulsara & Co) for the importer.

Held, allowing the appeal, that it was open to a person who had imported goods without payment of duty to argue that the goods had been bought for private use for the purposes of seeking to invoke the discretionary procedure of restoration of those goods under section 152(b) of the Customs and Excise Management Act 1979; that that procedure did not involve a challenge to the forfeiture, which could not be done save in condemnation proceedings; and that, accordingly, the question of whether the goods should be restored would be remitted to the commissioners with the direction to consider that question in the light of the fact that the goods were not purchased for profit.