[2011] UKFTT 44 (TC)

TC00921

Appeal number: TC/2010/03796

INCOME TAX – section 34 ITTOIA – whether motoring expenses shown to be wholly and exclusively for professional purposes?  No on the facts
CAPITAL GAINS TAX – whether taxpayer disponor alone or with wife?  Alone on the facts - Appeal dismissed

FIRST-TIER TRIBUNAL
TAX 

	Dr ADEBOYR SAMSON JOLAOSO	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	TRIBUNAL JUDGE:        ADRIAN SHIPWRIGHT
				TRIBUNAL MEMBER:   LESLEY STALKER

Sitting in public in London on 26 October, 2010

Cletus Oswige, Accountant appeared for the Appellant
Karen Weare of HM Revenue and Customs appeared for the Respondents

© CROWN COPYRIGHT 2010

DECISION

Introduction
1.	 This is an appeal by Dr Adeboyr Samson Jolaoso (“the Appellant”)  against the Respondents’ (“HMRC”) amendment to his self assessment for the year 2005-2006 in respect of motoring expenses and for the year 2006-2007 in respect of the capital gain on the disposal of a flat.
2.	There are thus two aspects to this appeal:
(1)	How much of the capital gain from the disposal of a flat (" the Property") should be charged on the Appellant (“the Capital Gains Point”);
(2)	How much of the motor expenses were allowable (“the Motoring Point”)?
3.	The Respondents’ decision following a review was set out in a letter dated 29 March 2010 (“the Decision Letter”).  The Decision Letter upheld the earlier decisions, namely that:
(1)	 the whole capital gain was chargeable on the Appellant and not on him and his wife equally; and
(2)	only 10% rather than 50% of the motoring expenses were allowable.
4.	The amendments were made by Closure Notices issued on 19 November 2009. These were sent to the agent but not to the Appellant till 28 January 2010. Various changes were made by these notices and some have not been appealed.
The Issues 
5.	 The issues in this case are whether:
(1)	 on the Capital Gains Point, the agreed chargeable gain on the disposal of  the Property is chargeable wholly on the Appellant or on the Appellant and his wife in equal shares; and
(2)	on the Motoring Point the expenses, and if so how much, are allowable in computing the Appellant’s self employment income for tax purposes. In particular were the expenses incurred wholly and exclusively for the purposes of the profession.
6.	We remind ourselves that the onus is on the Appellant to show why HMRC’s decisions on the Capital Gains Point and the Motoring Point should not stand.
Common Ground 
7.	It was common ground and agreed between the parties that there was a gain of £22,071.62 from the disposal of the property. This could be reduced by available allowable losses and annual exempt amounts available to the disponor.  Who was the disponor was an issue in the case.
8.	An inquiry was opened into the Appellant’s tax return for the year 2005-06 on 22 January 2008 and for 2006-07 on 22 June 2008.
9.	Various adjustments were agreed and are not in issue before us as noted above.
10.	HMRC Form 17 “Notice of declaration of interests in joint property and income” was signed by the Appellant and his wife on 29 November 2007. 
11.	The Property was sold in July 2006.
The Law 
12.	The legislation in so far as is relevant here is found in 
(1)	Sections 1 and 58 TCGA in respect of Capital Gains Point; and 
(2)	section 34 ITTOIA in respect of the Motoring Point.
13.	Section 1	TCGA is headed “The charge to tax”. Subsection (1) provides:	
“Tax shall be charged in accordance with this Act in respect of capital gains, that is to say chargeable gains computed in accordance with this Act and accruing to a person on the disposal of assets”. [emphasis added] The time of disposal for capital gains tax purposes is generally the time of contract.
14.	Section 34 ITTOIA is headed “Expenses not wholly and exclusively for trade and unconnected losses”. It provides: 	
“(1)	In calculating the profits of a trade, no deduction is allowed for—
(a)	expenses not incurred wholly and exclusively for the purposes of the trade, or
(b)	losses not connected with or arising out of the trade.
(2)	If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.”
15.	We were provided with a bundle of authorities including
(1)	Newsom v Robertson 33 TC 452;
(2)	Horton v Young 47 TC 60;
(3)	Jackman v Powell 76 TC 87.
We have read and carefully considered these cases.
16.	We also remind ourselves of certain aspects of the Law of Property Act 1925(“LPA”) as amended.
17.	Section 52 LPA is headed “Conveyances to be by deed”. It provides:
“(1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed....”
18.	Section 53 LPA is headed “Instruments required to be in writing”. It provides:
“(1) Subject to the provision hereinafter contained with respect to the creation of interests in land by parol—
(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;
(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2) This section does not affect the creation or operation of resulting, implied or constructive trusts”
19.	Section 54 LPA is headed “Creation of interests in land by parol”. It provides:
“ (1) All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.
(2) Nothing in the foregoing provisions of this Part of this Act shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine”.
The Evidence
20.	We were provided with a volume of documentation.  This was an agreed bundle of documents. The documents were all admitted in evidence no objection having been taken to any of the documents.
21.	We heard no oral evidence. 
The Facts 
22.	From the evidence we make the following findings of fact.
(1)	The Appellant is a doctor who qualified in 1986.  He is a gynaecologist.  
(2)	For the years of assessment in question he was employed as an NHS consultant at Lewisham Hospital. He lives in Ilford.
(3)	He and his wife married in 1994 before the purchase of the property.
(4)	The Appellant also carried on in private practice as a self-employed medical practitioner from November 2003 to June 2007.
(5)	For the year 2005 – 2006 he had admission rights at three private hospitals.
(6)	He rented a consultation room at one of the hospitals and his secretary was based there.  This source made a loss in the years in question
(7)	The leasehold of a flat in London (i.e. the Property) was purchased in April 2004.  A mortgage loan was used to purchase the Property.
(8)	The Property was let and rental income was received.
(9)	This Property was sold in July 2006.  The sale resulted in a chargeable gain.  The appellant declared half of this gain on his self-assessment return for 2007 – 2008.
(10)	He also receives rental income from another property in London.
(11)	 No corroborated evidence was led as to the frequency of travel or why it was undertaken.  Nor was there any corroborated evidence led as to the number of journeys and/or why they were undertaken.  The relative expenses were not identified.  There was no corroborated evidence as to what cost any travel attracted.
(12)	It was suggested that there were 17 Monday afternoons when there was travel and three Wednesday evenings. However there was no corroborative evidence. We have borne in mind the limitation of patient confidentiality when looking at this matter. 
(13)	We find that there was no evidence before us that justified a 50% allowance of motoring expenses. We find as a primary fact that the Appellant has not discharged the burden of showing that more than 10% (as HMRC have generously allowed) of the motoring expenses related to the profession.
(14)	There was no corroborated evidence before us that the property was jointly owned. Such evidence, as there was, was consistent with it being owned solely by the Appellant.
(15)	In particular: 
(a)	the mortgage offer documentation etc was addressed to the Appellant not to the Appellant and his wife;
(b)	the solicitors’ letters were addressed to the Appellant alone and not the Appellant and his wife;
(c)	there was no document led complying with section 62 – 54 LPA giving the appellant's wife an estate or interest in the Property; 
(d)	the title was solely in the Appellant's name not the Appellant and his wife’s name; 
(e)	the mortgage correspondent was in the Appellant's name and not his and his wife's name; and
(f)	there was no evidence of contribution to the purchase price or mortgage by anyone other than the Appellant nor of any “common intention” as to entitlement.
(16)	We find that the Appellant has not discharged the burden of showing that the property was not owned by him alone. It has not been shown that the property was jointly owned. We find that at the time of disposal it was owned by the Appellant alone and not by the Appellant and his wife.
(17)	It may be that the Appellant has given away half also the proceeds of sale to his wife. However, the question at issue here is to whom did the gain arise. Here it was the owner ie the Appellant not the Appellant and his wife. What is done with the proceeds does affect the position in these circumstances.
The Submissions of the Parties
The Appellant’s Submissions in outline
23.	In essence, the Appellant submitted that:
(1)	as he had given a half share to his spouse only half the chargeable gain from the sale of the property was chargeable on him as the other half was chargeable on his wife;
(2)	he needed the car to carry out his practice the expense of which was wholly and exclusively for this purpose and if not at least 50% was. He had another car for private use.
HMRC’s Submissions in outline
20.	In essence, HMRC submitted that:
(1)	there was no evidence to show that the Appellant's spouse was entitled to a half share in the property at the time of disposal and accordingly the gain was his and taxable on him
(2) the correct proportion of the motoring expenses had not been shown to be other than10% the onus being on the Appellant.
Discussion  
Introduction
21.	The issue for determination here, are:
(1)	The Capital Gains Point; and 
(2)	 The Motoring Point.
The Capital Gains Point 
24.	We have found that the Appellant has not discharged the burden of showing that the Property was not owned by him alone. It has not been shown that the Property was jointly owned. We find that at the time of disposal it was owned by the Appellant alone and not by the Appellant and his wife. Consequently, the gain is wholly (and not just as to half) taxable on the Appellant.
 The Motoring Point
22.	We have found as a primary fact that the Appellant has not discharged the burden of showing that more than 10% (as HMRC have generously allowed) of the motoring expenses related to the profession. Consequently, no more than 10% can be allowed in computing the profits of the profession.
Outcome
23.	We have found against the Appellant on both the Capital Gains Point and the Motoring Point.
24.	Accordingly, the Appeal is dismissed.

25.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

			

ADRIAN SHIPWRIGHT

TRIBUNAL JUDGE
RELEASE DATE: 12 JANUARY 2011