QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
B e f o r e :
|THE QUEEN ON THE APPLICATION OF BARNETT||(CLAIMANT)|
|COMMISSIONERS OF INLAND REVENUE||(DEFENDANT)|
Smith Bernal Wordwave Limited
190 Fleet Street London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MS I SIMLER (hearing) & MR A NAWBATT (judgment)(instructed by Inland Revenue) appeared on behalf of the DEFENDANT
Crown Copyright ©
"152 Roll-over relief
(1) If the consideration which a person carrying on a trade obtains for the disposal of, or of his interest in, assets ('the old assets') used, and used only, for the purposes of the trade throughout the period of ownership is applied by him in acquiring other assets, or an interest in other assets ('the new assets') which on the application are taken into use, and used only, for the purposes of the trade, and the old assets and new assets are within the classes of assets listed in section 155, then the person carrying on the trade shall, on making a claim as respects the consideration which has been so applied, be treated for the purposes of this Act -
(a) as if the consideration for the disposal of, or of the interest in, the old assets were (if otherwise of a greater amount or value) of such amount as would secure that on the disposal neither a gain nor a loss accrues to him, and
(b) as if the amount or value of the consideration for the acquisition of, or of the interest in, the new assets were reduced by the excess of the amount or value of the actual consideration which he is treated as receiving under paragraph (a) above
but neither paragraph (a) nor paragraph (b) above shall affect the treatment for the purposes of this Act of the other party to the transaction involving the old assets, or of the other party to the transaction involving the new assets.
(2) Where subsection (1)(a) above applies to exclude a gain which, in consequence of Schedule 2, is not all chargeable gain, the amount of the reduction to be made under subsection (1)(b) above shall be the amount of the chargeable gain, and not the whole amount of the gain.
(3) Subject to subsection (4) below, this section shall only apply if the acquisition of, or of the interest in, the new assets takes place, or an unconditional contract for the acquisition is entered into, in the period beginning 12 months before and ending 3 years after the disposal of, or of the interest in, the old assets, or at such earlier or later time as the Board may by notice allow."
"Extension of the time limit in Section 152(3) is permitted where the claimant can demonstrate that
they had a firm intention to acquire replacement assets within the time limit
they were prevented by some fact or circumstance beyond their control from acquiring the replacement assets, or any assets, within the time limit
acted as soon as they reasonably could after ceasing to be so prevented.
It is a question of fact and degree and each case is considered on its own merits. Examples of circumstances outside the claimant's control might include death or serious illness of a vital party at a crucial time, unsettled disputes or litigation, genuine difficulty in establishing good title or in finding suitable replacement assets or delay in receipt of disposal consideration.
A mere change of intention at a late stage or a shortage of funds arising out of application of disposal consideration to some purpose other than the acquisition of new qualifying assets will not normally be regarded as circumstances beyond the claimant's control."
It is to be noted that where the three identified elements are demonstrated it is provided that an extension of time is permitted not that it may be permitted. It is also to be noted that the policy expressly states that it is a question of fact and degree and each case is considered on its own merits.
"The Appellant therefore seeks a determination of the factual basis upon which the discretion is to be exercised namely that:
 The Appellant had a firm intention to acquire a replacement asset by 22nd April 1989, namely 13 Elrington Road, Hackney, London E8.
 The Appellant was prevented by some fact or circumstance beyond his control from acquiring the replacement asset.
 The circumstance outside the Appellant's control was the unsettled dispute over planning permission.
 The circumstance outside the Appellant's control was not shortage of funds ...
 Obtaining planning permission was determinative of whether 13, Elrington Road, Hackney, London E8 could be a suitable replacement asset ...
 The Appellant acted as soon as he reasonably could after ceasing to be so prevented."
Various evidential references were given to support those propositions.
"The Commissioners dismissed the appeal because they were not persuaded that Mr Barnett had entered an unconditional contract to purchase 13 Elrington Rd London E8 within three years of the sale of 14 Belsize Park Gardens London NW3. He is not therefore entitled to the roll-over relief afforded by S 152(3) of Taxation of Chargeable Gains Act 1992.
The Commissioners had no jurisdiction to consider the Board's exercise of the discretion allowed under S 152(3). They also found that this was not a case where the Extra-Statutory concession referred to in D24 applied, because that concession related to the use of replacement assets. However they considered that the provisions in paragraph CG60640 of the Capital Gains Manual were analogous to those in D24, so far as they related to the way in which the Revenue should interpret S152(3). In those circumstances the Commissioners were satisfied that they were entitled to review whether this case fell within the provisions of CG60640, according to the approach set out by Sir Richard Scott VC in Steibelt (Inspector of Taxes) v Puling. The Commissioners found that Mr Barnett had the firm intention to acquire replacement assets within the time-limit, but was prevented from contracting to purchase 13 Elrington Rd by a delay in obtaining the appropriate planning consent, and that he acted to purchase the property as soon as the planning position was clarified."
"The Board has been asked to exercise the discretionary powers given to it by virtue of section 115(3) Capital Gains Tax Act 1979 so as to permit a capital gain accruing to Mr M A Barnett, of 33 Belsize Park Gardens, London NW3 4JJ in respect of a disposal of 'old assets' (14 Belsize Park Gardens) on 22 April 1986 to be relieved against an acquisition by him of 'new assets' (13 Elrington Road) on 27 July 1989.
Under the general statutory rule contained in section 115(3), the gain accruing to Mr Barnett would fall to be relieved only if an unconditional contract for the acquisition of 'new assets' had been entered into by him no later than three years after the disposal of the 'old assets' ie in this case by 21 April 1989. The Board is, however, empowered by the statute to extend the period beyond 21 April 1989 if it so allows by giving notice.
Notice of extension will be given only where the Board is satisfied that there was a clear intention on the part of a claimant to acquire 'new assets' within the statutory period referred to in section 115(3) and that the claimant was prevented from entering into an unconditional contract of acquisition within that time by reason of circumstances beyond his control.
Having reviewed the case again in the light of the Commissioners' decision on Mr Barnett's appeal which was heard on 12 November 2002, whilst the Board is satisfied that Mr Barnett intended to acquire replacement 'new assets', it still does not consider that he has shown either that there were particular circumstances beyond his control which prevented an acquisition of 'new assets' by 21 April 1989 or that any such circumstances persisted beyond that time and continued until the acquisition of 13 Elrington Road in July 1989.
In reaching this decision, the Board has taken account of the nature of Mr Barnett's business activities and the likely availability of replacement assets on the market suitable for use and occupation for the purpose of those activities. It has been unable to conclude that there were compelling circumstances which obliged Mr Barnett to acquire 13 Elrington Road, rather than any other similar property, for the purposes of his business. Nor has it found any evidence that 13 Elrington Road possessed any unique or special characteristics rendering this property the only, or most suitable, asset for business acquisition. It is the Board's view that Mr Barnett's decision to pursue the acquisition of this particular property (despite the absence of appropriate planning consent for business use) to the apparent exclusion of other suitable properties, was driven principally by his relationship with the vendor, Foldell Ltd, rather than by facts and circumstances beyond his control.
The Board is also of the view that, in relation to 13 Elrington Road itself, the absence of business planning consent was not an impediment to Mr Barnett's entering into an unconditional contract for the acquisition of that property from Foldell Ltd within the statutory three year reinvestment period specified in section 115(3).
Accordingly, the Board will not exercise its statutory discretion to issue a notice under section 115(3) extending the reinvestment period to encompass the acquisition of 13 Elrington Road. In consequence, this acquisition by Mr Barnett will not fall to be taken into account for the purposes of capital gains tax in determining Mr Barnett's claim to relief under section 115 in respect of the gain accruing to him on the disposal of 14 Belsize Park Gardens on 22 April 1986."
"I regard D24 as being a very sensible attempt by the Revenue to indicate how it believes the language of the 1992 Act in this regard should be applied. I think it highly likely that, as a matter of construction, a court would conclude that that was how the 1992 Act should be applied. I am not satisfied that in publishing D24 the Revenue was making any concession at all. It would be making a concession only if the true construction of the 1992 Act were stricter than the approach outlined in D24.
Accordingly, if that is a legitimate approach to the function of D24, and I believe that it is, the question whether, on the facts of the case, a particular taxpayer complies with the various requirements of D24 is the same as the question whether, on the facts, s 152(1) on its true construction applies."
Thus D24 was not being regarded as an extra statutory concession at all, but an attempt to explain the meaning of section 152(1). It is thus quite different both in kind and in type to CG60640. The General Commissioners in the present case proceeded on a wrong footing accordingly.