Philip Norman McCall v Revenue & Customs Commissioners (2008)


Although the tending and letting of fields to graziers constituted a business, it was one which consisted wholly or mainly of the holding of an investment and so the land was not a relevant business property for the purposes of the Inheritance Tax Act 1984 s.105.


The appellant personal representatives of the estate of a farmland owner (M) appealed against the respondent Revenue's determination that fields which she owned when she died were not relevant business property within the Inheritance Tax Act 1984 s.105. M had let land under agistment agreements to local farmers for grazing. M's son-in-law (X) tended the land as M's mental health deteriorated. Upon her death, the local authority zoned the land for development use which dramatically increased its market value. The Revenue determined that the land was not relevant business property and therefore inheritance tax was payable on its full market value, not just its agricultural value. The issues that arose were (1) whether the letting of the land in agistment could be called a business; (2) if so, was that business owned by M or X; (3) if it was a business, was it a business which consisted wholly or mainly of the making or holding of investments.


In order to determine whether an activity was a business for the purposes of the 1984 Act, it was necessary to consider whether it was a serious undertaking, occupation or function actively pursued with reasonable continuity which could be measured by the quarterly or annual value of its outputs, and whether it was conducted in a regular manner on sound business principles and was predominantly concerned with making supplies to consumers for consideration, where the supplies were of a kind which were commonly made by those who sought to profit from them, Customs and Excise Commissioners v Lord Fisher (1981) 2 All ER 147 QBD and Customs and Excise Commissioners v Morrison's Academy Boarding Houses Association (1978) STC 1 IH (1 Div) applied. In the instant case, the letting of the land was earnestly pursued, the work tending the land was modest but serious, the letting and the tending were pursued with some continuity, the income was not insubstantial, the letting was conducted in a regular manner although the unpaid use of X's time was something which was not a feature of an ordinary business and the letting of land for profit was a common business. (2) X would have acted as M's agent until she lost capacity and thereafter he had continued to be in a fiduciary capacity and was a constructive trustee for her of any profit made from the property. The consequence was that his activities in making that profit were properly to be treated as those of M, and the business to be treated as hers. (3) Under s.105(3), the land would not be a relevant business property if the business consisted wholly or mainly of making or holding investments. That was the situation in the instant case because the activities of the business consisted simply of making its major asset available to other persons for payment without the separate provision of any substantial other goods or services. The land was used not to make a living on but to make a living from, and as such it was used as an investment. The land was not used to create a product or to provide any service distinct from the use of the land.

Appeal dismissed