Buckley & Anor v Revenue and Customs [2005] UKSPC SPC00505 (19 September 2005)

SPC505
CAPITAL GAINS TAX — disposal of shares in company — retention of shares — retirement relief — TGCA 1992 s 163 — whether conditions for relief satisfied — no — roll-over relief — TGCA 1992 s 152 — whether conditions satisfied — no — appeal dismissed

THE SPECIAL COMMISSIONERS

 

HECTOR BUCKLEY & BRIAN BUCKLEY	Appellants

- and -

THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Special Commissioner: Colin Bishopp

Sitting in public in Manchester on 12 September 2005

The Appellants did not appear and were not represented

John Cormack, Northern England Regional Appeals Unit, for the Respondents 

© CROWN COPYRIGHT 2005

DECISION

1.	This appeal raised, or appeared to raise, three issues: the value on 31 March 1982 of the taxpayers’ shares in Hildale Farms Limited (“Hildale”); whether either or both of the taxpayers is or are entitled to retirement relief in respect of any chargeable gain made upon the sale of his shares in Hildale on 25 May 1991; and whether either or both of the taxpayers is or are entitled to roll-over relief in respect of the same gain. The first issue was resolved in May 2005 when the taxpayers’ representatives formally withdrew that limb of the appeal, but they were silent about the other two issues despite requests by the Respondents that they make their position clear.
2.	When the residue of the appeal came on for hearing, neither taxpayer was present, and nor were their representatives. They had not had the courtesy to let the Clerk to the Special Commissioners know what their intentions were and I had to assume, despite their apparent abandonment of the appeal, that there remained two outstanding issues, and I therefore proceeded to determine the appeal.
3.	Hildale is, or was, a dairy company. It had several shareholders. The taxpayers are father and son but I understand they had no relationship by blood or marriage to the remaining shareholders. The taxpayers each owned 128 of the 1635 issued shares in the company, and sold them to a fellow shareholder on 25 May 1991 for a gross sum of £220,000. The costs of sale in each case were (according to the taxpayers) £6,968 leaving net proceeds of £213,032. That sum is agreed. Shortly after the sale, when the taxpayers were represented by chartered accountants, the sale was disclosed to the Inland Revenue (as it then was) and negotiations between the accountants and the Shares Valuation Division began, leading eventually to agreement that the 31 March 1982 value of the shares (required for the purposes of s 35 of the Taxation of Chargeable Gains Act 1992) was £572 per share. Each taxpayer had acquired a few of the shares after 31 March 1982. After taking into account the cost of that acquisition and the appropriate indexation allowance, each was left with a chargeable gain of £95,614. That figure also appears to be agreed.
4.	However, when the taxpayers changed their representatives shortly after the 1982 value of the shares had been agreed, or apparently agreed, they at first sought to resile from that agreement (though, in May 2005, conceding that the agreed value was after all correct) and in addition, raised the two other issues which I have mentioned. Their case, so far as I can derive it from the correspondence produced to me, seems to be, as to the first, that the taxpayers retired from Hildale’s business, in which they had previously been active participants, and, as to the second, that the proceeds of the sale were invested in the building of a new dairy, though as far as I am aware, no supporting evidence of that investment has been produced. The Respondents’ position is that the taxpayers do not qualify for either form of relief.
5.	Retirement relief is dealt with by s 163 of the 1992 Act which, though now repealed, remains in force for disposals in 1991-92 as in this case. Several conditions must be satisfied if the relief is to be available. The taxpayer must, at the time of disposal, have attained the age of 55 (later reduced to 50) or have retired on ill-health grounds at an earlier age; and have made a “material disposal”. By 25 May 1991, Mr Hector Buckley had attained the age of 55, but Mr Brian Buckley had not, and he had not retired on ill-health grounds as he continued to work in another partnership with his father. Even if he could overcome that hurdle, however, neither he nor his father appears to have made a material disposal, which must (in the case of a disposal of shares) be of shares in the taxpayer’s “family company”, or of assets owned by such a company (see sub-ss (3), (4) and (5) as they were at the material time). A “family company” was defined, by Sch 6, para 1(2), as one in which the individual had 25% of the voting rights and he with other members of his family together had more than 50%. Such evidence as I have indicates that the taxpayers each had 7.8% of the shares (or 15.6% together) and that no other members of their family owned any shares. I accept Mr Cormack’s argument that the taxpayers do not qualify for the relief.
6.	The conditions which must be satisfied if roll-over relief is to be available are set out in s 152(1) of the 1992 Act. In particular, the assets disposed of and the assets acquired with the proceeds of sale must fall within the categories specified in s 155; shares, whether or not in a family company, are not so specified. Again, I accept the Respondents’ argument that the taxpayers do not satisfy the qualifying conditions.
7.	I add only that I agree too with Mr Cormack that one cannot (as the taxpayers’ representatives contend) look beyond the shares in the company to the company’s own assets. He referred me to a number of authorities but I do not think it is necessary to look further than the legislation. Parliament has prescribed a number of assets whose disposal may leave the seller with a gain against which he may offset a claim for retirement or roll-over relief, and those assets include various tangible and intangible items. They are all very closely defined. Shares are included but only in limited circumstances (and not at all in relation to roll-over relief). There is no room for a conclusion that Parliament, having enacted such detailed provisions, intended a wide, liberal construction so as to include assets other than those specified. There is no merit in the argument.
8.	I determine the appeal upon the basis that each taxpayer made a chargeable gain of £95,614, and that in neither case is retirement relief or roll-over relief available. 

COLIN BISHOPP 
SPECIAL COMMISSIONER
Release Date: 19 September 2005
SC/3045-6/2005