[2013] UKFTT 204 (TC)
TC02619
Appeal number: TC/2011/04902
CAPITAL
GAINS TAX – section 35 TCGA 1992 – whether asset held on 31 March 1982 – nature
of asset – alleged interest in land by way of estoppel – series of licences to
extract sand – in the alternative, reliance on section 43 TCGA 1992 – appeal
dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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P & J McCANN
(TOOMEBRIDGE) LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS
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Respondents
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TRIBUNAL:
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JUDGE JONATHAN CANNAN
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MS CELINE CORRIGAN FCA
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Sitting in public in Belfast on 6 February 2013
Mr Mark Orr QC instructed by Grant
Thornton UK LLP Chartered Accountants for the Appellant
Mr John Corbett of HM Revenue
& Customs for the Respondents
© CROWN COPYRIGHT
2013
DECISION
Background
1. The McCann
family have traded as sand merchants since 1935, extracting sand from the bed
of Lough Neagh. The business was at some stage incorporated and the appellant
company came into being. In 1998 the business was sold to RMC Quarries (Ulster) Limited (“RMC”). This appeal concerns the liability of the appellant to capital
gains tax (“CGT”) on disposal of the business. In particular the sum to be
deducted from the disposal proceeds by reference to the value of the assets
disposed of as at 31 March 1982.
2. In the
early 1960s the Shaftesbury Estate established title to the bed of Lough
Neagh. At that time it granted licences to 9 existing businesses to extract
sand. Those businesses together formed the Lough Neagh Sand Traders
Association, Northern Ireland Limited (“the Sand Traders Association”). The
purpose of the Sand Traders Association was to represent the interests of its
members in their dealings with the Shaftesbury Estate. The first licence granted
to the McCann family was dated 18 October 1965. We set out below the terms of
that and subsequent licences.
3. One of the
assets disposed of by the appellant in 1998 was the right to extract sand from Lough
Neagh. We are concerned in this appeal with whether the asset disposed of in
1998 existed as such in March 1982. Put briefly Mr Orr QC, who appears on
behalf of the appellant, says that the appellant has had a right to extract
sand since well before 1982. It is this right he says which was one of the
assets disposed of in 1998 and which falls to be valued as at March 1982 in
calculating the CGT liability on disposal.
4. Mr Orr’s
principal submission is that the appellant’s right to extract sand arose not
simply by virtue of the continuous licences which had been in existence since
1965, but as an interest arising by way of estoppel against the Shaftesbury
Estate. He submitted that the right to extract sand arose by way of a
proprietary estoppel or alternatively an estoppel by convention.
5. Mr
Corbett, who appears on behalf of the respondent, says that the asset disposed
of in 1998 was the benefit of a licence which had been granted in September
1998 shortly before the disposal. A licence had been granted initially in 1965
and renewed on various dates thereafter. However he submitted that for the
purposes of the CGT computation the interest under the 1998 licence did not
exist in March 1982. He further submitted that the facts did not support the
appellant’s claim to proprietary estoppel or an estoppel by convention.
6. We set out
below our findings of fact relevant to the issues which arise on this appeal.
Those findings are based on the oral evidence of Mr Peter McCann, who is a
director of the appellant, together with the documentary evidence presented to
us. Apart from some limited correspondence which was before us we have not
heard any evidence as to the position of the Shaftesbury Estate in relation to
the claims made by the appellant. Our findings on this appeal will not in any
way affect the interests of the Shaftesbury Estate or RMC.
7. Having set
out our findings of fact we consider the matters of law addressed to us by the
parties, and in the light of that consideration we reach our decision on the
appeal.
Findings of Fact
8. There was
no real dispute as to Mr McCann’s evidence. The focus of the parties was on the
significance of that evidence, and in particular whether it is sufficient to
establish the interests which the appellant submits arise by way of estoppel.
9. Mr McCann
is 63 years of age and has been involved in the family business of extracting
sand from the bed of Lough Neagh throughout his life. The business was
originally started by his father and uncle who shovelled sand on to the back of
a lorry. As time passed the business grew and they used more and more plant and
machinery in the business.
10. In the early 1960s, when the
Shaftesbury Estate established its right to the bed of Lough Neagh, the
business received a demand for royalties from the Shaftesbury Estate for the
right to extract sand. There were then 9 businesses extracting sand and
together they formed the Sand Traders Association. The first licence was granted
by the Shaftesbury Estate in 1965. We shall refer to this as “the 1965 Licence”
and to the later licences in similar terms depending on the year they were
granted. All licences were expressed to be by way of deed.
11. The 1965 Licence was made
between The Shaftesbury Estate of Lough Neagh Limited, The Sand Traders
Association and Mr McCann’s father and uncle. Licences in identical terms were
granted to the other members of the Sand Traders Association. It was common
ground that at all times since 1965 a licence to extract sand has been in place
and each of the businesses operating on Lough Neagh has extracted sand on the
same terms as the other businesses.
12. The 1965 Licence granted to each
licensee the right to win, work and get sand from Lough Neagh. Clause 2(2)
included the right to:
“enter upon … Lough Neagh
and to use such buildings engines machinery plant or equipment of the Licencees
now existing or hereafter to be constructed or installed with the consent in
writing of the Owner such consent not to be unreasonably withheld as may be
necessary or convenient for the purposes aforesaid.”
13. The 1965 Licence was
effective from 1 May 1964 for a term of 10 years. The licensees also had an
option to continue the licence for a further period of 10 years. No premium was
payable on the granting of the licence, or indeed on the granting of any of the
subsequent licences. The licensees were required to pay an annual sum of £100
together with a royalty of 3d for every ton of sand won. In the event that the
licensees exercised their option to extend the licence the sum payable as a
royalty was either 3d per ton or, at the option of the owner, 1/50th
of the price per ton for which the sand was sold. In any event no royalty was
payable on the first 8,000 tons of sand won in the first or any subsequent
year.
14. By a deed of rectification
entered into in October 1965 the area of Lough Neagh over which the rights were
granted was further defined and restricted. The Shaftesbury Estate also
covenanted not to grant a licence to anyone who was not a member of the Sand
Traders Association save with the consent of that association.
15. By 1974 the appellant
operated a single 80 tonne barge on Lough Neagh for the purpose of extracting
sand.
16. It is not clear whether the
option for a 10 year extension contained in the 1965 licence was exercised, or
a new licence was granted. It has not been possible to obtain the relevant
documentation. In any event both parties were agreed that a licence was in
place throughout the period from 1965 to 1998.
17. In or about 1991 the
business purchased a further 4 acres of land adjoining the shore of Lough Neagh in order to expand. At this time the land owned by the business included a
dwelling house, a garage for maintenance of plant and equipment and various
buildings housing “classification plant” for manufacturing different grades of
sand. This process involved blending the fine sand extracted from Lough Neagh
with coarser sand purchased from elsewhere. By 1991 the business used 4 barges
on Lough Neagh, the smallest of which was 350 tonnes.
18. On 30 April 1993 the 1993
Licence was granted. The parties to the 1993 Licence were the Shaftesbury
Estate, the Sand Traders Association and P & J McCann Limited. It was in
similar terms to the 1965 Licence as rectified save that it was effective from
1 November 1992 for a period of 20 years. Clause 2(2) of the 1965 Licence as
set out above was repeated.
19. The sums payable under the
1993 Licence were set for 5 year periods. In the first 5 years the sums payable
were £500 per year plus 6½p per ton of sand won over and above 3,846 tons in
any half year. In the next 5 years the sums payable were £600 per year plus 8½p
per ton of sand won over and above 3,530 tons in any year. In the next 5 years
the sums payable were £700 per year plus 10½p per ton of sand won over and
above 3,334 tons in any year. In the last 5 years the sums payable were £800
per year plus 12½p per ton of sand won over and above 3,200 tons in any year.
20. The 1993 Licence contained a
covenant against assignment by the licensee and a covenant by the licensor not
to grant a licence to anyone who was not a member of the Sand Traders
Association.
21. On 10 May 1996 a deed was
executed excluding from the 1993 Licence an area of Lough Neagh known as Kinnego Bay which the Shaftesbury Estate had agreed to sell to a third party.
22. On 14 September 1998 the 1998
Licence was granted. This took the place of the 1993 Licence because the Sand Traders
Association, which had been a party to the previous licences, had ceased to
exist. Again the 1998 Licence was in similar terms to the 1965 Licence as
rectified save that it was effective from 1 November 1997 for a period of 49
years. Clause 2(2) of the 1965 Licence as set out above was repeated. The sums
payable under the 1998 Licence were the same as would have been payable if the
1993 Licence had continued for its full term. For the 5 yearly periods after 1
November 2012 the sums payable were a yearly licence fee of £500 which was a
minimum payment on account of royalties. The royalty was to be a sum agreed
between the parties. In default of agreement a surveyor was to be appointed as
an expert to determine the royalties which would be payable between a willing
licensor and a willing licensee on the open market.
23. The 1998 Licence contained a
covenant against assignment by the licensee and a covenant by the licensor not
to grant more than 7 licences to extract sand from the Lough. In the period of
time since 1965 the number of businesses extracting sand had reduced to 7.
24. We accept Mr McCann’s
evidence that there was never any difficulty in agreeing the 1965 Licence or
the subsequent licences. When a licence was due to be renewed the Shaftesbury
Estate would send a draft licence to The Sand Traders Association and there was
very little negotiation involved. The royalties required by the Shaftesbury
Estate were never excessive, indeed the Shaftesbury Estate was more concerned
with aspects of health and safety on the Lough.
25. By 1998 there was plant and
machinery used in the business with a cost price of about £1.2 million. A
schedule attached to the contract of sale to RMC suggested that this was
purchased in the period between 1970 and 1998. It comprised mobile plant such
as diggers, trailers and mixers; static plant such as classification systems;
vehicles such as tippers and trailers; and barges.
26. We are satisfied that the
Shaftesbury Estate was aware that the McCann’s business was making a
significant investment over the years in order to extract sand from Lough Neagh.
We were not specifically referred to Clause 2(2) set out above. There was no
evidence of any express consent from the Shaftesbury Estate, however as we read
it the provision refers to things constructed or installed on land belonging to
the Shaftesbury Estate rather than land belonging to the business. In any event
the respondents did not suggest that the Shaftesbury Estate was unaware of
expenditure by the business on plant and machinery or that it objected in any
way to such expenditure.
27. There was no direct evidence
before us from the Shaftesbury Estate. There was however some correspondence in
2010 between the appellant’s representative and the Shaftesbury Estate in
relation to the respondents’ enquiry into the tax position. The appellant was
seeking copies of the licence agreements, and also an understanding of the way
in which licences were renewed. They asked “…whether the renewal process was
automatic … and whether in the Estate’s view each licence holder could, with
the agreement of [The Sand Traders Association], continue to extract sand over
a prolonged period and that the licence really was there as a method of
regulation should the need arise”.
28. The Shaftesbury Estate
responded in a letter dated 7 October 2010 which stated “There is no clause
relating to automatic renewal however the majority of traders continue dredging
with consent from the Estate”.
29. We were not referred to any
other evidence or documents which shed any light on the position of the
Shaftesbury Estate with regard to the appellant’s claim that it had established
an interest to extract sand by way of proprietary estoppel or estoppel by
convention. We note from our consideration of the bundle following the hearing
that there were some telephone conversations in October 2010 and January 2011 between
both Grant Thornton and HMRC with the secretary of the Shaftesbury Estate.
These appear to show conflicting responses as to whether the Shaftesbury Estate
accepted that the sand traders had any right to extract sand over and above the
rights contained in the licences. Given this conflict and the absence of any
direct evidence from the Shaftesbury Estate we attach no weight to this
material in considering the issues before us.
30. The disposal giving rise to
a chargeable gain was to RMC. The evidence included the written sale agreement
(“the Contract”) dated 26 November 1998. The parties to the Contract included
the appellant, Mr Peter McCann, Carmel McCann and RMC. The way in which the disposal
was structured was that the appellant sold the business which it was carrying
on and the assets used in the business. Most of the assets including goodwill
were owned by the appellant. Certain land was owned by Mr McCann and Carmel
McCann and the Contract also dealt with that land. The 1998 Licence Agreement
was in the name of P & J McCann Limited. The shares in that company (“the
Shares”) were held as to 99% by Peter McCann and 1% by Carmel McCann. The
Contract included a sale of the Shares to RMC.
31. The total consideration
payable under the Contract was £2,315,000 together with the value of certain
stock and £1 for the Shares. The consideration of £2,315,000 was apportioned in
a schedule to the Contract so as to include £1,192,000 for plant, machinery and
equipment. The value of the right to extract sand was not included in the value
of the Shares, rather it was included in the value of goodwill which was put at
£1,002,997. The reason why the right to extract sand was treated as an asset of
the appellant and not as part of the value of the Shares was not explored in
evidence. There is some suggestion in the papers that whilst P & J McCann
Limited held the license the beneficial interest lay with the appellant.
However that is not a matter we need concern ourselves with.
Consideration of the Law
32. Mr Orr’s primary submission
was that the appellant had disposed of a right to extract sand which had been established
by way of a proprietary estoppel or an estoppel by convention prior to 1982. In
the alternative he submitted that if the asset disposed of was an interest
under the 1998 Licence then for CGT purposes that asset was not a new asset but
was to be treated as having existed in 1982. On each basis he submitted that
the CGT computation should include credit for the 1982 market value.
33. It is convenient when
considering the law to refer firstly to the relevant sections of the Taxation
of Chargeable Gains Act 1992 (“TCGA 1992”). It is against the background of
these provisions that Mr Orr makes his submissions.
34. Section 35 TCGA 1992 has
the effect that it is only gains made since 1982 that are chargeable to CGT. It
provides as follows:
“ (1) This section applies to a
disposal of an asset which was held on 31st March 1982 by the person making the
disposal.
(2) Subject to the following
provisions of this section, in computing for the purpose of this Act the gain
or loss accruing on the disposal it shall be assumed that the asset was on 31st
March 1982 sold by the person making the disposal, and immediately reacquired
by him, at its market value on that date.”
35. For present purposes we are
concerned with the deemed re-acquisition on 31 March 1982 at the market value
as at that date. By section 38(1)(a) TCGA 1992 the acquisition cost of
an asset is deductible in computing the gain on disposal. The deduction only
arises where the asset disposed of was held on 31 March 1982.
36. Section 43 TCGA 1992
makes provision for the situation where assets are derived from other assets.
It provides as follows:
“ If and so far as, in a case where assets have been
merged or divided or have changed their nature or rights or interests in or
over assets have been created or extinguished, the value of an asset is derived
from any other asset in the same ownership, an appropriate proportion of the
sums allowable as a deduction in the computation of a gain in respect of the
other asset under paragraphs (a) and (b) of section 38(1) shall, both for the
purpose of the computation of a gain accruing on the disposal of the
first-mentioned asset and, if the other asset remains in existence, on a
disposal of that other asset, be attributed to the first-mentioned asset.”
37. The broad effect if not the
language of section 43 is clear. Where the value of an asset disposed of is
derived from another asset the sums allowable as a deduction in computing the
gain on disposal of the first asset include an appropriate proportion of the
sums which would be allowable on a disposal of the other asset.
38. The section was considered
by Browne-Wilkinson J in Bayley v Rogers [1980] STC 544. That case
concerned a new tenancy under the Landlord and Tenant Act 1954. In particular
whether what is now section 43 had the effect that on disposal of the new lease
under the 1954 Act the 1965 time apportionment provisions should apply by
reference to the original lease. He stated as follows:
“… the Crown submits, and
in my judgment rightly, one has to ascertain the nature of the lease, and
whether one lease is part of another or is a separate asset, by reference to
the status of the lease under general law.
…
I cannot say that I find
[section 43] altogether easy, but it seems to me that in the present case the
conditions for the application of [section 43] cannot be said to have occurred.
It cannot be said that the 1960 lease had been merged; nor has it been divided;
nor has it changed its nature. Then, can it be said that ‘rights or interests
in or over assets have been created or extinguished’? Again, I cannot see that
any right or interest in or over the 1960 lease has been created or
extinguished. All that has happened is that the 1960 lease has expired.”
39. The Landlord and Tenant Act
1954 has never applied in Northern Ireland. In any event the right to extract
sand is a mining lease which would not have protection under the 1954 Act or
the equivalent legislation in Northern Ireland. However that distinction is not
relevant for present purposes because we accept the submission of both parties
that it is the principled approach set out in Bayley v Rogers which must be
applied to the facts of this appeal and that involves ascertaining the nature
of the relevant interests as a matter of general law.
40. Mr Corbett also referred us
to Inland Revenue Commissioners v Gray [1994] STC 360 and Holt v
Inland Revenue Commissioners [1953] 2 All ER 1499. These were both cases on
valuation for the purposes of capital transfer tax and estate duty and do not
assist in resolving the issue on this appeal which is one of identifying the
asset disposed of. In any event the proposition Mr Corbett sought to derive
from these cases was that the asset disposed of must exist as at March 1982
either as a matter of fact or by virtue of section 43. Mr Orr did not dispute
that proposition.
41. Mr Orr’s primary submission
was that the facts supported the existence of an interest to extract sand apart
from the licences. In this regard he relied upon either a proprietary estoppel
or an estoppel by convention. This submission did not rely on section 43. Mr
Orr’s secondary submission was that even if there was no proprietary estoppel
or estoppel by convention then section 43 would apply to treat the 1998 Licence
as having been derived from the licences pre-dating March 1982.
42. There was no real dispute
between the parties as to what was required in order to establish an interest by
way of proprietary estoppel. Both parties relied on a decision of the Court of
Appeal in Suggitt v Suggitt [2012] EWCA Civ 1140. That was a case
involving an unconditional promise by a farmer to his son that on his death the
farm would be his. We were referred to a short description of proprietary
estoppel by Arden LJ at [19]:
“ As is
well known, there are four requirements for proprietary estoppel. There must be
an assurance, reliance and detriment. In addition, the relief granted by the
court must be the minimum necessary to satisfy the equity.”
43. The relief granted by the
High Court in that case, with which the Court of Appeal did not interfere, was
to grant the claimant an interest in the farmland.
44. Put simply, Mr Orr submits
that all those elements are present in the relationship between the appellant
and the Shaftesbury Estate such that by March 1982 the appellant would have
been able to obtain a declaration of the court that it was entitled to a
proprietary interest in the land. That, he said, was the asset or one of the
assets disposed of by the appellant in 1998.
45. Alternatively Mr Orr submits
that in 1982 the appellant was entitled to a right to extract sand from Lough
Neagh by virtue of an estoppel by convention. Again both parties relied on a
description of governing principles given by the Court of Appeal in ING Bank NV v Ros Roca SA [2011] EWCA 353. That case concerned the entitlement of ING to a
fee for the provision of financial services. There was an issue as to the
construction of the contract between ING and Ros Roca. Ros Roca succeeded in
the High Court. ING was successful on appeal on the point of construction but
Ros Roca argued that in any event ING was precluded by estoppel from relying on
that construction. At [57] Carnwarth LJ adopted and applied the statement of
principle of Lord Steyn in Republic of India v India
Steamship Co [1998] AC 878:
“ It is settled that an
estoppel by convention may arise where parties to a transaction act on an
assumed state of facts or law, the assumption being either shared by them both
or made by one and acquiesced in by the other. The effect of an estoppel by
convention is to preclude a party from denying the assumed facts or law if it
would be unjust to allow him to go back on the assumption: The August Leonhardt
[1985] 2 Lloyd's Rep. 28; The Vistafjord [1988] 2 Lloyd's Rep. 343; Treitel,
Law of Contracts, 9th ed., at 112-113. It is not enough that each of the two
parties acts on an assumption not communicated to the other. But it was rightly
accepted by counsel for both parties that a concluded agreement is not a
requirement for an estoppel by convention.”
46. It does not seem to us that
the distinction between proprietary estoppel on the one hand and estoppel by
convention on the other hand is material for the purposes of this appeal. It is
a requirement of both forms of estoppel that it should be unjust or unconscionable
for Shaftesbury Estate to resile from an assurance or from their acquiescence
in an assumption made by the appellant or its predecessors in title.
47. Both parties were agreed that
whichever form or estoppel was being considered the injustice or unconscionable
circumstances giving rise to the relief must have arisen by March 1982.
Reasons for Decision
48. Mr Orr’s case on estoppel
was based on an assurance from the Shaftesbury Estate prior to 1982 that the
appellant would be entitled to continue extracting sand from Lough Neagh
notwithstanding the fact that the licences were expressed to be for certain
terms of years. Alternatively that was an assumption made by the appellant
which was acquiesced in by the Shaftesbury Estate.
49. Both parties agreed that the
burden was on the appellant to establish the facts necessary to support its
case. Our findings of fact set out above are made on the balance of probabilities.
The question which now arises is whether we are satisfied on the balance of
probabilities that the Shaftesbury Estate expressly or impliedly gave such
assurances to the Appellant. Alternatively that the appellant assumed such a
state of affairs and the Shaftesbury Estate acquiesced in that assumption.
50. Mr Orr relied in particular
on the following facts and matters:
(1)
The appellant never had any difficulty in obtaining the 1965 licence or
in renewing subsequent licences.
(2)
No premium was ever paid by the appellant for the grant of a licence.
(3)
Considerable sums of money were invested in the business to the
knowledge of the Shaftesbury Estate and without objection.
51. The appellant’s case faces
formidable difficulties based on the evidence before us. Not least because it
must establish the factual and legal position in March 1982 and we certainly do
not have a complete picture of all the relevant circumstances as at that date. The
documentary evidence we have in the form of the various licences dated before
and after March 1982 sets out the basis of a commercial relationship between
the appellant and the Shaftesbury Estate. The actions of the appellant in
conducting its business are all readily explicable by reference to the
licences. On the face of it the appellant, the Shaftesbury Estate and the Sand
Traders Association were content for their commercial relationship to be
defined by the licences.
52. There is no documentary
evidence that the terms of those licences did not reflect the commercial terms
on which the parties dealt with one another. All parties, in particular the
Shaftesbury Estate, were astute to ensure that on the expiry of a licence it
was replaced with another licence on similar terms save that the royalties
increased over time. The fact that there was no difficulty in negotiating new
licences is not a factor to which we attach much weight. It is consistent with
the appellant’s case, but it is also consistent with a cordial commercial
relationship.
53. The fact that no premium was
paid for any licence is not in our view indicative that the appellant had any
interest over and above what was defined by the licences. It could equally
reflect the fact that the appellant was over time making a significant
investment in its business which would be reflected by greater royalties
payable to the Shaftesbury Estate. There is no evidence that the royalty
payments were any more or less than a freely negotiated commercial rate. Indeed
the 1998 Licence made provision for royalties after 2012 to be fixed by
reference to what would be payable between a willing licensor and a willing
licensee on the open market.
54. We do not consider that
knowledge of capital expenditure by the appellant and acquiescence in that
expenditure on the part of the Shaftesbury Estate gives rise to any injustice
or that it would be otherwise unconscionable for the appellant’s interest to be
limited to that expressly granted by the licences. The appellant incurred expenditure
knowing the terms of its agreement with the Shaftesbury Estate. The appellant no
doubt hoped when it made that expenditure that the various licences would be
renewed at the end of their terms. However we are not satisfied that when the
expenditure was incurred the Shaftesbury Estate had given any assurance that
the licences would be renewed. There was no evidence of any express assurance,
and the evidence of the circumstances is not sufficient for us to be satisfied
that there was any implied assurance that the licences would be renewed.
55. Even if there had been
reliance by the appellant on an assurance by the Shaftesbury Estate, the
appellant has to establish that such reliance was detrimental. The expenditure
was all capital expenditure on plant and machinery which enabled the appellant
to derive an income from the extraction of sand. We had no evidence as to the
profits realised by the appellant from the extraction of sand over the years up
to 1982, or indeed in subsequent years. We do not know the level of capital
expenditure on assets employed in the business as at March 1982. Even if by
that time there had been no overall return on the investment, the appellant
still had the assets which no doubt had some value either on a piecemeal
disposal or on a sale of the business. In those circumstances we cannot be
satisfied that the appellant’s reliance was detrimental.
56. Mr Orr submitted that the
relevant assurance or assumption was that a licence would be granted by the
Shaftesbury Estate for a nominal rent and annual royalty for as long as the
appellant wished to extract sand from Lough Neagh. We do not consider that the
evidence supports the existence of such an assurance by the Shaftesbury Estate.
Nor indeed do we accept that the appellant made such a wide-ranging assumption.
The reality is that the appellant merely hoped that the licence would continue
to be renewed.
57. In terms of proprietary
estoppel, we are not satisfied that there was any assurance or detrimental
reliance by the appellant. In any event we are not satisfied that the minimum
relief necessary in 1982 would have involved the grant of an interest to
extract sand.
58. In terms of estoppel by
convention we are not satisfied that there was a common assumption that the
appellant had any interest in land going beyond that granted by the various
licences. Nor are we satisfied that the Shaftesbury Estate acquiesced in such
an assumption by the appellant.
59. The licence agreements
undoubtedly confer an interest in land in the form of a profit à prendre, the
right to extract sand, together with a right to enter upon the land for the
purpose of exploiting that interest. Mr Orr’s alternative argument was that the
licences were continuous and the benefit of the licence disposed of in 1998 was
by virtue of section 43 to be treated as the same asset as that held in March
1982. We adopt the same approach to this argument as that adopted by
Browne-Wilkinson J as he then was in Bayley v Rogers. We ask ourselves whether
the conditions set out in that section have occurred?
60. Mr Orr did not suggest that
the licences had “merged”. In land law that describes the situation where an interest
in land becomes held be the same person who is entitled to a superior interest;
nor has any licence been divided; nor has it changed its nature; nor has any
right or interest in a licence been created or extinguished. All that can be
said is that the pre-1982 licence came to an end and a new licence was created.
In our view the conditions required to engage section 43 have not been
satisfied on the facts of the present appeal.
Decision
61. For the reasons given above
we consider that the asset disposed of by the appellant in 1998 was the right
to extract sand pursuant to the 1998 licence. We are not satisfied that there
was any further interest by way of estoppel. Nor do we consider that section 43
TCGA 1992 operates on the facts of the present case to treat the asset disposed
of as being derived from a right to extract sand arising under pre-1982
licences. In the circumstances we must dismiss the appeal.
62. 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.
JONATHAN
CANNAN
TRIBUNAL JUDGE
RELEASE DATE: 28 March 2013
