Business Tax - CASE LAW Flashcards
Badges of Trade
NAME THE CASE
Land transactions questions to define trade; is the tax payer…
a) Is the taxpayer investing or dealing? Marson v Morton ( trading as modified land by way of applying for planning permission)
b) Is the taxpayer a resident in the property or a developer?
Kirky v Hughes (trader rebuilding houses)
Taylor v Good (buy and sell with intention to live in it)
Badges of Trade
NAME THE CASE
When a 1st transaction ceases to be capital transaction?
When a series of transactions are treated as trading, this will taint the first time such a transaction was carried out so that it can no longer be regarded as a capital transaction.
Leach v Pogson (purchased driving school sold serveral times)
Badges of Trade
NAME CASES
When share dealing is a trade
individual is subject of..
Private individuals (who are not share dealers) are usually subject to capital gains tax on the disposal of shares regardless of how often they buy and sell shares.
However, in extreme cases they may be treated as trading.
Similarly, companies may trade in shares.
Salt v Chamberlain (capital in nature unless done under registered share dealer)
but* Akthar Ali v HMRC* can be classed as trading (determins on facts of individual)
or company Lewis Emanuel & Son Ltd v White (diversify in shares)
Badges of Trade
NAME THE CASE
Financing arrangements
Wisdom v Chamberlain (buing on short term loan unable to service interest payment)
Badges of Trade
Repetition/frequency (number of similar transactions) * name the case
Pickford v Quirke (mill sold interior frequently)
Badges of Trade
Organisation (existence of a sales organisation) * name the case
Cape Brandy Syndicate
Badges of Trade
Nature of the asset * name the case
Routledge v CIR (Comissioners of Inland Revenue) (1mil toilet rolls)
Capital Allowances
What is key case in determinin
when an item is part of premises v plant
J D Wetherspoon plc v Revenue and Customs Commissioners [2012]
preliminary cost - pro rata | cost installing P&M in existing building
unexceptional component - part of the premises (BT pg 71)
Capital Allowances
name the case where, ‘Partition walls where moveable and intended to be moved in the course of the qualifying activity.’
Walls are part of the building and do not qualify as plant.
Jarrold v John Good & Sons Ltd [1962]
incorporated into s.23 CAA 2001, List C
the court found that moveable partitions were ‘apparatus with which the company carried on its business’ and hence qualified as plant.
Capital Allowances
name case
‘Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.’
CIR v Scottish & Newcastle Breweries Ltd [1982]
contra to : J D Wetherspoon plc v Revenue and Customs Commissioners
The court agreed with the company and allowed capital allowances to be claimed on the grounds that the expenditure went to create ‘atmosphere or ambience’ and this was an important function of the company’s particular trade.
Capital Allowances
name the case
‘Swimming pools (including diving boards, slides [etc]).’
Cooke v Beach Station Caravans Ltd
a company operated a caravan park and claimed capital allowances on the construction costs of two swimming pools. HMRC denied the claim on the basis that the swimming pools were part of the setting. However, the court found in favour of the taxpayer and said that the pools were ‘part of the means whereby the trade is carried on, and not merely the place in which it is carried on’.
Capital Allowances
NAME THE CASE
The taxpayer claimed that the canopy was plant on the grounds that it formed part of the apparatus for delivering petrol.
Dixon v Fitch’s Garage Ltd [1975]
The canopy was not plant qualifying for capital allowances. It did not help with the delivery of petrol but, by providing shelter and illumination, merely made its supply more comfortable for the staff of the petrol station and for motorists.
Accordingly, the canopy could not be regarded as part of the apparatus by which petrol was supplied and therefore did not perform a function in carrying on the trade.
Capital Allowances
NAME THE CASE
In 1962 it incurred expenditure on acquiring and converting an old ship and barge for use as a floating restaurant.
The company claimed it was entitled to capital allowances in relation to that expenditure, on the grounds that the ship and barge were essential apparatus for carrying on a floating restaurant business and should therefore be treated as plant.
The ship and barge were subject to movement by the tide and waves and this, according to the taxpayer, enhanced the atmosphere within the restaurant.
Benson v Yard Arm Club Ltd [1979]
The ship and barge were not plant.
They merely provided the structure within which the business was carried on and were not part of the apparatus employed in the commercial activities of the business.
The fact that the ship and barge were chattels and were not attached to the rail was held not to be relevant.
Capital Allowances
NAME THE CASE
A firm of caterers installed false ceilings in the parts of its premises which were open to the public.
The ceilings were a permanent fixture and they provided support for pipes, electrical conduits, lighting apparatus, ventilation trunking etc, which related to the services used by the company for carrying on its trade.
HMRC refused a claim for capital allowances on the grounds that the ceilings were not plant.
Hampton v Fortes Autogrill Ltd [1980]
The ceilings were not plant. The ceilings acted as a covering and therefore provided the setting in which the trade was carried on. They were not necessary for the functioning of any apparatus and did not perform a function in the carrying on of the trade.
Capital Allowances
NAME THE CASE
A chain of fast food restaurants was refitted with removable items (such as pictures, carpets, screens etc) and fixed items (such as staircases, raised ceilings and floors, shop fronts, tiling etc).
The items were installed to provide ambience and to attract customers to enable profits rather than losses to be generated.
Wimpy International Ltd v Warland [1989]
The fixed items were not plant, whereas the removable items were. The fixed items formed part of the premises in which the trade was carried on and were not items with which the trade was carried on.
