England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Evans-Lombe)

		Royal Courts of Justice Strand London WC2 Tuesday 13 March 2001

Tuesday 13 March 2001

1. LORD JUSTICE ROBERT WALKER: This is an application for permission to appeal in a tax case by the taxpayer, Dr Geoffrey Longson, who wishes to appeal from an order of Evans-Lombe J made on 16 November 2000. The judge's judgment is reported at [2001] STC 6. The order dismissed Dr Longson's appeal from a decision of a single Special Commissioner, Mr THK Everett, who on 8 May 2000 dismissed Dr Longson's appeal from assessments to capital gains tax for the 1994-5 and 1995-6 years of assessment.
2. This would be a second appeal, and by s 55 of the Access to Justice Act 1999 a second appeal is permissible only if it would raise an important point of principle or practice or for some other compelling reason. In this case the issue is not so much whether an important point of principle arises, but whether the taxpayer has any realistic prospect of success in a further appeal.
3. The assessment arose out of the disposal on 15 December 1995 of Dr Longson's interest in his former matrimonial home and its adjoining land, Velmead Farm and Stud, Church Crookham, Hampshire. The issue was to as to the extent of the "permitted area" of land which could under section 222(2) and (3) of the Taxation of Chargeable Gains Act 1992 share in the exemption enjoyed by Dr Longson's principal private residence. Subsections (2) and (3) of s 222 provide:

"(2) In this section the 'permitted area' means, subject to subsections (3) and (4) below, an area (inclusive of the site of the dwelling house) of 0.5 of a hectare.

(3) In any permitted case the permitted area shall be any area, larger than 0.5 of a hectare, as the Commissioners concerned may determine if satisfied that, regard being had to the size and character of the dwelling-house, that larger area is required for the reasonable enjoyment of it (or of the part in question) as a residence."

4. Half a hectare is approximately one and a quarter acres.
5. Dr Longson bought Velmead Farm in 1979. It is a Grade II listed building with five bedrooms and three bathrooms. Its outbuildings included four stable blocks, one with 13 loose boxes and two others with four each. Later Dr Longson put up a steel-framed riding school. The property had 7.56 hectares (18.68 acres) of land laid out as paddocks.
6. In those circumstances it comes as no surprise that all the family (Dr Longson, his former wife, his daughter Tanya and his son Mark) were keenly interested in equestrian activities. Details of these (and much more detail about the house, outbuildings and land) are set out in the careful findings of fact in the written decision of the Special Commissioner. However, the family's interests are not directly material since, as the Special Commissioner said:

". . . it is the house to which I must look and not the wishes, desires or intentions of any particular owner of the house."

7. Mr Alun Jones, appearing on this application, has accepted that the test under s 222(3) is an objective test.
8. The size of the permitted area has assumed great financial importance in this case because the house and land have now been sold for £2.75m for development. The Special Commissioner heard evidence from various witnesses, including Mr Brynley Powell, a former three-day event rider. He said that the 18.68 acres was sufficient to provide proper grazing for only eight horses (that is, fewer than the stables could accommodate). The Special Commissioner accepted his evidence but regarded it as irrelevant. The taxpayer was contending that the whole of the land was "required for the reasonable enjoyment" of the house which included, as I have noted, stabling for some 20 or so horses. The Inspector of Taxes was prepared to concede 2.61 acres (that is, just over one hectare).
9. The Special Commissioner decided in favour of the Inspector. He said:

"I have come to the conclusion that it may have been desirable or convenient for Dr Longson to have a total area of 7.56 hectares to enjoy with Velmead Farm, but such an area is not in my judgment required [original emphasis] for the reasonable enjoyment of Velmead Farm as a residence having regard to its size and character."

10. An appeal lay to the High Court on a point of law only. Before Evans-Lombe J Mr Jamess attacked the Special Commissioner's approach and reasoning. He emphasised that it was agreed that the dwelling-house included the extensive stabling. Therefore, he argued, the dwelling-house should have been looked at as an equestrian property, the reasonable enjoyment of which required at least the 18.68 acres of paddocks which surrounded it.
11. The judge rejected those arguments. He said:

"It seems to me that they disregard the inclusion in subsection (3) of the words 'as a residence' in the phrase 'regard being had to the size and character of the dwelling-house that larger area is required for the reasonable enjoyment of it as a residence'."

12. In his notice of appeal and skeleton argument, and in his clear submissions this morning, Mr James has contended that the judge made an error of law by overlooking the qualification "reasonable" attached to "the ... enjoyment of [the property] as a residence", and overlooking the stabling in his assessment of the "size and character" of the dwelling-house. Mr James has summarised his submissions as being that the judge erred, first in supposing that there was a requirement of necessity; secondly in paying insufficient attention to the stables as an integral part of the house; and thirdly in attaching too much importance to the words "as a residence" which are intended, Mr James has submitted, to exclude any possible business use.
13. The point is ultimately a short one. Mr James has skilfully said all that there is to be said in support of the application. However, in my view the Special Commissioner and the judge were plainly right in the view which they took. Mr James' submissions give insufficient weight to the words "as a residence" in section 222(3). A further appeal would in my view be hopeless. I would dismiss this application.
14. THE VICE-CHANCELLOR: I agree.
ORDER: Application refused