Mr & Mrs Tapsell & Mr Lester (as Partnership "The Granleys" v Revenue & Customs [2011] UKFTT 376 (TC) (08 June 2011)
DECISION
1. This
is an appeal against an amendment made under Section 28B (1) and (2) of the
Taxes Management Act (“TMA”) 1970 to The Granley’s tax return for the year
ended 5 April 2004.
2. The
issues set out by the parties for the Tribunal to determine are:
(a)
whether expenditure of £106,014 in 2003/2004 was qualifying expenditure
for the purposes of Capital Allowances;
(b)
whether a claim had been previously made and, if so, whether the
Tribunal should direct HMRC to make a just and reasonable apportionment.
Law
3. We
were referred to the following sections of the Capital Allowances Act 2001:
57 Available qualifying expenditureE+W+S+N.I.
(1)The general rule is that a person’s available
qualifying expenditure in a pool for a chargeable period consists of—
(a)any qualifying expenditure allocated to the pool
for that period in accordance with section 58, and
(b)any unrelieved qualifying expenditure carried
forward in the pool from the previous chargeable period under section 59.
58 Initial allocation of qualifying expenditure to
poolsE+W+S+N.I.
(1)The following rules apply to the allocation of a
person’s qualifying expenditure to the appropriate pool.
(2)An amount of qualifying expenditure is not to be
allocated to a pool for a chargeable period if that amount has been taken into
account in determining the person’s available qualifying expenditure for an
earlier chargeable period.
(3)Qualifying expenditure is not to be allocated to a
pool for a chargeable period before that in which the expenditure is incurred.
(4)Qualifying expenditure is not to be allocated to a
pool for a chargeable period unless the person owns the plant or machinery at
some time in that period.
(5)If a first-year allowance is made in respect of an
amount of first-year qualifying expenditure—
(a)subject to subsection (6), none of that amount is
to be allocated to a pool for the chargeable period in which the expenditure is
incurred, and
(b)the amount that may be allocated to a pool for any
chargeable period is limited to the balance left after deducting the first-year
allowance.
(6)If—
(a)a first-year allowance is made in respect of an
amount of first-year qualifying expenditure,
(b)a disposal event occurs in respect of the plant or
machinery in any chargeable period, and
(c)none of the balance left after deducting the
first-year allowance has been allocated to a pool for an earlier chargeable
period,
the balance (or some of it) must be allocated to a
pool for the chargeable period in which the disposal event occurs.
(7)Subsection (6) applies even if the balance is nil
(because of a 100% first-year allowance).
(8)“The appropriate pool” means whichever pool is
applicable under the provisions of this Part apart from this section
185 Fixture on which a plant and machinery
allowance has been claimedE+W+S+N.I.
(1)This section applies if—
(a)a person (“the current owner”) is treated as the
owner of a fixture as a result of incurring capital expenditure (“new
expenditure”) on its provision,
(b)the plant or machinery is treated as having been
owned at a relevant earlier time by any person (“the past owner”) as a result
of incurring other expenditure,
(c)the plant or machinery is within paragraph (b)
otherwise than as a result of section 538 (contribution allowances for plant
and machinery), and
(d)the past owner is or has been required to bring the
disposal value of the plant or machinery into account (as a result of having
made a claim in respect of that other expenditure).
(2)If the new expenditure exceeds the maximum
allowable amount, the excess-
(a) is to be left out of account in determining the
current owner’s qualifying expenditure, or
(b) if the new expenditure has already been taken into
account for this purpose, is to be treated as expenditure that should never
have been taken into account.
562 Apportionment where property sold togetherE+W+S+N.I.
(1)Any reference in this Act to the sale of property
includes the sale of that property together with any other property.
(2)For the purposes of subsection (1), all property
sold as a result of one bargain is to be treated as sold together even though—
(a)separate prices are, or purport to be, agreed for
separate items of that property, or
(b)there are, or purport to be, separate sales of
separate items of that property.
(3)If an item of property is sold together with other
property, then, for the purposes of this Act—
(a)the net proceeds of the sale of that item are to be
treated as being so much of the net proceeds of sale of all the property as, on
a just and reasonable apportionment, is attributable to that item, and
(b)the expenditure incurred on the provision or
purchase of that item is to be treated as being so much of the consideration
given for all the property as, on a just and reasonable apportionment, is
attributable to that item.
(4)This section applies, with the necessary
modifications, to other proceeds (consisting of insurance money or other
compensation) as it applies in relation to the net proceeds of a sale.
(5)This section applies in relation to Part 5 as if
expenditure on the provision or purchase of an item of property included
expenditure on the acquisition of—
(a)a mineral asset (as defined by section 397), or
(b)land outside the United Kingdom
563 Procedure for determining certain questions
affecting two or more personsE+W+S+N.I.
(1)This section applies in relation to the
determination of a question if—
(a)at the time when the question falls to be
determined, it appears that the determination is material to the liability to
tax (for whatever period) of two or more persons, and
(b)section 564 provides for this section to apply.
(2)The Commissioners who are to determine the
question, for the purposes of the tax of all the persons concerned, are given
in subsections (3) to (5).
(3)If—
(a)the same body of General Commissioners has
jurisdiction with respect to all the persons concerned, and
(b)those persons do not agree that the determination
is to be made by the Special Commissioners,
the determination is to be made by that body of
General Commissioners.
(4)If—
(a)different bodies of General Commissioners have
jurisdiction with respect to the persons concerned, and
(b)those persons do not agree that the determination
is to be made by the Special Commissioners,
the determination is to be made by such of those
bodies of General Commissioners as the Board of Inland Revenue may direct.
(5)In any other case, the determination is to be made
by the Special Commissioners.
(6)The Commissioners must determine the question in
the same way as an appeal, but all the persons concerned are entitled—
(a)to appear before and be heard by the Commissioners,
or
(b)to make representations to them in writing.
564 Questions to which procedure in section 563
appliesE+W+S+N.I.
(1)Section 563 applies in relation to the
determination for the purposes of any of Parts 3 to 11 or this Part of any
question about the way in which a sum is to be apportioned.
(2)Section 563 applies in relation to any
determination of the market value of property for the purposes of—
(a)any provision of Part 2 (plant and machinery
allowances),
(b)section 423 (mineral extraction allowances: amount of disposal value to be brought into account),
(c)section 559 (effect of successions),
(d)section 568 or 569 (sales treated as being for
alternative amount), or
(e)section 573 (transfers treated as sales).
(3)Section 563 applies in relation to any
determination of the amount of any sums paid or proceeds for the purposes of
section 357 (industrial buildings allowances: arrangements having an artificial
effect on pricing).
(4)If section 561 (transfer of a UK trade to a company in another member State) applies, section 563 applies—
(a)for the purposes of the tax of both company A and
company B referred to in that section, and
(b)in relation to the determination of any question of
apportionment of expenditure under section 561(3).
Background Facts
4. Mr
and Mrs Tapsell and Mr Lester, as a partnership called The Granleys, purchased
The Haven Residential Care Home (“The Haven”) from Mr and Mrs Jones in December
2003.
5. The
total cost was £650.001, comprised as shown in the purchase agreement of:
(a)
Benefit of contracts £1
(b)
Goodwill £12,500
(c)
Fixtures and fittings £40,000
(d)
Property £597,500
6. On
26 September 2003 Mr and Mrs Jones instructed a company called (at the time)
Tax Management Services (“TMS”) which later changed its name to Moonwell. TMS
were commissioned to value fixed plant and machinery in order to pursue an
additional Retrospective Capital Allowance Claim.
7. A
letter dated 8 September 2004 from Mrs Jones to Mr David Bracewell of TMS
enclosed accounts and Capital Allowance documents from Mr and Mrs Jones’
previous accountant.
8. An
email dated 2 December 2008 from Mr Bracewell to Mr Lester on behalf of the
Appellants confirmed that Mr Jones had provided TMS with two cheques which
subsequently bounced. As a result, Mr Bracewell’s email explains that TMS took
the decision not to proceed with the claim on behalf of Mr and Mrs Jones as Mr
Jones was moving to the USA and TMS were concerned that they may not receive
payment due for work undertaken on the instruction of Mr and Mrs Jones. Mr
Bracewell confirms in his email to Mr Lester that when The Haven was sold, TMS
contacted the Appellants to see if they wished to proceed with the claim. Mr
Bracewell confirmed that the claim report was never given to Mr and Mrs Jones.
9. A
letter dated 17 July 2007 from TMS to the Appellants’ representatives
Hazlewoods LLP with which we were provided set out further details of the
background to this case. Mr Bracewell, on behalf of TMS, stated in the letter
that TMS were asked by Mr and Mrs Jones in November 2003 to assist with a
retrospective capital allowances claim. The letter stated:
“We completed all our work...but the business was sold
before they could make a claim so we approached the new owners with regard to
making a claim...”
10. The completed report dated 9 March 2004 was provided to
the Appellants after they had purchased the property. The report produced by
TMS identified additional plant and machinery of £106,014. None of the items
covered by the report were included in the figure of £40,000 relating to
fixture and fittings in the purchase agreement referred to in paragraph 5.
11. An email dated
15 December 2009 from Mr Bracewell of TMS to the Appellant’s representative
stated:
“...I had already had two bounced cheques...of the
Jones’s...so I reasoned that my chances of receiving my fees were virtually
nil. I was conscious, however, that they might have tried to somehow interfere
with Mr Lester’s claim so I hadn’t at this stage told them that I wasn’t going
to proceed with their’s so they were still supplying me with information...”
12. The Appellants
partnership tax return for the year ended 5 April 2004 was received by HMRC on
17 January 2005 and included the claim for 40% first year allowance on the
additional items identified within the report which reduced its taxable profits
by £42,405. The Appellants also claimed capital allowances on the £40,000
identified within the sale agreement relating to fixtures and fittings.
13. On 1 March 2005
the partnership tax return of Mr and Mrs Jones was received in relation to The
Haven. The capital allowances claim of Mr and Mrs Jones contained in the
partnership tax return was declared as £68,811 for the period 2003/2004 as
compared with that claimed for the period 2002/2003 which was £10,758.
14. As there is no
requirement for a breakdown of capital allowance claims within a Self Assessment
Tax Return, and no such details were provided by Mr and Mrs Jones, the details
of the claim are unknown.
15. HMRC disallowed
the Appellants’ claim in respect of the additional expenditure of £106,014 on
the basis that the Appellants’ have failed to show that the same expenditure
has not been claimed by Mr and Mrs Jones.
16. A review of
HMRC’s decision was carried out by Mr Jackson, an officer of HMRC. The conclusion
of the review was notified to the Appellants by letter to Mr Lester dated 15
July 2009. The grounds set out in the letter can be summarised as follows;
(a)
The starting point is Section 562 CAA 2001 which requires that, for
capital allowances purposes, the expenditure on an item shall be established by
apportioning the consideration given for the whole of the property on a just
and reasonable basis. This applies regardless of how the consideration is
apportioned in the sale agreement.
(b)
The sale agreement apportioned the consideration as £40,000 for fixtures
and fittings, £12,500 for goodwill and £597,500 for the premises. The
partnership accounts, which reflected the valuation carried out by TMS,
apportioned £12,500 for goodwill, £146,014 for fixtures, fittings and equipment
and £491,486 for the premises.
(c)
Once expenditure is established, Section 185 CAA 2001 can restrict the
amount claimed to ensure that the amount on which capital allowances are
claimed cannot exceed the original cost.
(d)
Section 185 CAA 2001 provides that where a past owner is required to
bring a disposal value into account (in their capital allowances computations),
the new owner’s qualifying expenditure is to be limited to that value. The past
owner is required to bring a disposal value to account if they have claimed
capital allowances on the fixture.
(e)
The amount which relates to fixtures is unknown, but is at least
£106,014 in accordance with the report produced by TMS. If the previous owners
claimed capital allowances on any of these items, then the amount on which the
Appellants can claim is limited to the disposal value that they were required
to bring into account.
(f)
HMRC cannot determine whether claims have been made in respect of these
fixtures or not. Internal guidance taken from the Capital Allowances Manual
(CA26400) sets out the policy which HMRC is required to follow and states that “It
is the responsibility of the taxpayer to obtain and provide details of the past
owner and the disposal value. Where it seems likely that Section 185 will apply
but the taxpayer does not provide details of the previous disposal value, no
allowances should be given as the previous disposal value may be nil or
negligible.”
(g)
In this particular case there is every possibility that the previous
owners have claimed in respect of some or all of the fixtures. No evidence of
the amounts claimed on fixtures has been obtained from the vendors and the only
evidence we have of the disposal value that they are likely to have used is the
amount shown in the sale agreement of £40,000.
(h)
There was a strong possibility that Section 185 CAA 2001 should apply in
this case and HMRC’s guidance has been correctly followed in refusing the
claim.
The Appeal
17. By Notice of
Appeal dated 12 August 2009 the Appellants appealed against the decision by
HMRC following review, to uphold the amendment to the partnership Tax Return.
18. The effect of
the amendment was to increase the partnership’s profits by £48,099 as a result
of the disallowance of expenditure of £106,014 for the purposes of Capital
Allowances.
19. The grounds of
appeal were set out within the Notice of Appeal. It was submitted that the
Appellant acted in good faith and had taken all reasonable steps to verify
whether a claim has been made previously. On this basis a claim for capital
allowances can be made. The Appellant disputes HMRC’s suggestion that the
Appellant’s would need to provide evidence that no claim was made by Mr and Mrs
Jones, or the breakdown of such a claim as the Appellant would not have had the
ability to request such information, particularly given the fact that Mr and
Mrs Jones moved to America. HMRC have provided no evidence to support their
conclusion that there is a “strong possibility” that Mr and Mrs Jones have made
a claim.
Submissions
20. We were provided
with Statements of Case from both parties, together with 2 bundles of
supporting documentation, all of which we considered carefully. We also had the
opportunity to hear oral submissions from Mr Lester, nominated partner of The
Granleys.
(i) Case
for the Appellant
21. It was submitted
on behalf of the Appellants that they have acted in good faith and that it was
beyond the ability of the Appellants to request information from Mr and Mrs
Jones as to whether a claim was made as any claim they made was after the sale
of the property and the Appellants were under the impression that Mr and Mrs
Jones had moved to America. HMRC have provided no evidence in support of their
contention that Mr and Mrs Jones made a claim and further, Mr and Mrs Jones
would not have had access to the building after sale and therefore the only
source of information to enable a claim was the report of TMS which was not
provided to Mr and Mrs Jones. The Appellant’s representatives submitted that
their enquiries established that Mr and Mrs Jones carried on multiple business
ventures during the years in question and it was suggested that the explanation
for the level of capital allowances claimed on the Jones’ tax return related to
other business interests.
22. It was submitted
on behalf of the Appellant that Section 562 CAA 2001 specifically deals with
circumstances such as exist in this case. Section 562 provides for a “just and
reasonable apportionment” to be applied to both parties to the contract and we
were invited to follow the procedure set out in Section 563 to determine the
disputed valuation.
23. The Appellant
contended that to oblige a purchaser to enquire prior to completion whether a
claim would be made by a vendor would be to alert the vendor to the existence
of a potentially valuable asset which could compromise the purchaser’s
negotiating position and would therefore lack commercial logic.
24. The Appellant
disputed that the conditions of Section 185 CAA 2001 are satisfied and
submitted that the onus is upon HMRC to show that such conditions are satisfied
in order for the legislation to be applicable. It was submitted that there is
no legal presumption that capital allowances were or may have been claimed.
25. It was submitted
that there is no justification in law for HMRC’s refusal of the Appellant’s
claim and that the wording of Section 185 CAA 2001 cannot be interpreted so as
to permit HMRC to make assumptions. The Appellant contends that there is no
basis in law for HMRC to place the onus on a taxpayer to obtain and provide
information that is outside the taxpayer’s power or possession to obtain and
which should be in the possession of HMRC.
26. It was submitted
that had the Appellant been aware of the additional items identified in the
report of TMS, the apportionment within the sale agreement of £40,000 would not
have been agreed. If there are additional fixtures and fittings other than
those within the purchase agreement, the apportionment of the purchase cost
would not represent a just and reasonable apportionment.
(ii) Case for HMRC
27. HMRC submitted
that the conditions of Section 185 CAA 2001 are satisfied and therefore
applicable to this case.
28. It was submitted
that the onus rests on the person making the claim to demonstrate that capital
allowances have not been claimed on the expenditure by the previous owners and
that, as a consequence, the claim is not invalidated by Section 185 CAA 2001.
29. We were referred
to the case of West Somerset Railway Plc v Chivers (Inspector of Taxes)
[1995] STC (SCD) 1 which HMRC contended has similarities to the case
before us in that the taxpayer’s claim to capital allowances would only be
valid if there had been no such claim by previous owners. The case cited also
made clear that the burden of proof lies upon the person making the claim and
HMRC submitted that similarly, the Appellants in this case bear the burden of
proving that there had been no previous claim by Mr and Mrs Jones.
30. HMRC accept that
their internal guidance CA26400 is not legally binding on the Tribunal but
contends that all available evidence indicates that a claim was made by Mr and
Mrs Jones in respect of the additional plant and machinery expenditure as identified
in the report prepared by TMS and that the disposal value used by Mr and Mrs
Jones was either the £40,000 contained in the sale agreement or a nil amount.
31. The evidence
relied on by HMRC in support of their contention is:
(a)
Mr and Mrs Jones, by commissioning a report from TMS were aware of the
potential claim available to them and, irrespective of the fact that they did
not receive a copy of the report, there is no evidence to suggest that they did
not proceed with a claim;
(b)
Mr and Mrs Jones were informed by TMS that a 5 stage process would be
undertaken, including a survey of the premises, which would be completed by
October 2003. Mr and Mrs Jones were informed that unless another business was
started up in the short term, the remainder of the repayment would be available
from HMRC when they submitted their next return;
(c)
Contact continued between Mr and Mrs Jones and TMS after the sale of the
premises in the form of a letter from Mrs Jones to TMS dated 8 September 2004
which refers to “our recent conversation”;
(d)
TMS did not inform Mr and Mrs Jones that they would not proceed with
their claim as there were concerns that they may “interfere with” the
Appellant’s claim;
(e)
The Appellants’ capital allowances claim was contained within their
return which reached HMRC on 17 January 2005. As Mr and Mrs Jones did not
submit their partnership return until 1 March 2005 the Appellants could not
have known, at the time of making their claim, whether Mr and Mrs Jones would
make a claim unless they had obtained this information from Mr and Mrs Jones;
(f)
Mr and Mrs Jones’ partnership tax return was in relation to The Haven
and therefore would not have included any other business activities;
(g)
It can be deduced from the increase in the 2003/2004 claim (£68,811) as
compared with the previous year (£10,758) that Mr and Mrs Jones made an
additional capital allowance claim in respect of the full amount of £106,014.
HMRC provided a computation to support this assumption;
(h)
The disposal proceeds used in Mr and Mrs Jones’ capital allowance computation
are not known but it is reasonable to assume that they were in the region of
£40,000 as stated in the sales agreement;
(i)
The Appellants have limited their claim for fixtures and fittings to
qualifying expenditure of £40,000. The Appellants have failed to show that the
expenditure of £106,014 has not previously been claimed.
(iii) Mr Lester
32. Mr Lester stated
at the hearing that he believed that the vendors had intended to move to America following the sale as Mrs Jones was a USA citizen. Mr Lester stated that he had tried,
following the sale, to trace the vendors but to no avail. Mr Lester confirmed
that there had been no discussions between the parties as to whether a claim
for capital allowances would be made and that in fact, he only became aware of
the possibility of making a claim when approached by TMS to buy the report
which had been commissioned by Mr and Mrs Jones. Mr Lester accepted that he was
unaware of the contact between TMS and the vendors at the time when he had
instructed TMS and conceded that he was unable to say whether or not there had
been discussions between TMS and Mr and Mrs Jones as to the contents of the
report.
33. Mr Lester stated
that he and his partners had gone to reasonable lengths to establish whether
the vendors had made a claim and that even if they had, as he understood it,
the Appellants were not barred from making a claim, which they had done in good
faith.
Decision
34. We accepted that
Mr Lester had acted in good faith and were sympathetic to his position, however
the issue for us was whether a claim could be made by the Appellants, and, if
so, in what sum.
35. We carefully
considered the submissions of both parties. Our starting point was whether the
vendors had made a claim to capital allowances.
36. There was no
dispute that an election to apportion the sale price had not been made by the
parties and consequently Section 198 CAA 2001 takes this case no further.
37. The letter from
Mr and Mrs Jones to TMS dated 26 September 2003 encloses the accounts for the
period 1998 to 2002. We inferred that this letter did not contain the vendor’s
capital accounts as by letter dated 8 September 2004 Mr and Mrs Jones wrote to
TMS enclosing the capital accounts.
38. The completed
report was dated 9 March 2004, at which time TMS could not have known whether capital
allowances for items identified within their report either had been claimed
previously or would be claimed by the vendors upon submission of their
partnership return for the year ended 5 April 2004.
39. We found as a
fact that by commissioning the report and the contact between TMS and the
vendors continuing until, at least, September 2004, Mr and Mrs Jones were contemplating
making a claim. We found that it was possible, if not highly likely that Mr and
Mrs Jones would make a claim, even without the assistance of the report
prepared by TMS. TMS, as experienced practitioners in the area of capital
allowances, ought to have known that without the documents supplied by Mr and
Mrs Jones in September 2004, no claim could have been made on behalf of the Appellants.
Further, we found that TMS made no attempt, despite the contact with the
vendors, to clarify whether, and with what disposal figure, a claim might be
made by Mr and Mrs Jones.
40. We found that
inexplicably TMS went further and sought to prevent Mr and Mrs Jones from trying
to” somehow interfere with Mr Lester’s claim so I hadn’t at this stage told
them that I wasn’t going to proceed with their’s so they were still supplying
me with information...”(email dated 15 December 2009 from Mr Bracewell of
TMS to the Appellant’s representative). We found that TMS were content to use
the information provided by Mr and Mrs Jones without making any attempts to
enquire whether Mr and Mrs Jones had, or intended to, make a claim.
41. We therefore
considered the burden of proof in this case. The appeal is brought against an
amendment under Section 28B (1) and (2) TMA 1970. Section 50 (6) Taxes
Management Act 1970 It is a well established principles that in such appeals
the burden of proof lies with the taxpayer to show that the amendment or
adjustment is incorrect.
42. We rejected the
Appellant’s contention that the case of West Somerset Railway Plc v
Chivers (Inspector of Taxes) [1995] STC (SCD) 1can be
distinguished due to the lengthy period over which it had to be shown that the
Appellant’s predecessors had had not become entitled to an allowance in respect
of capital expenditure. We found that the case had addressed similar issues,
irrespective of the length of time involved. The Court was clear in stating:
“The burden of proof in this appeal lies fairly
and squarely upon the company and I must say at once that Mr P Rivett FCCA, who
appeared for the company and argued its case with no little skill failed to
show that 'no person has previously become entitled to an allowance in respect
of capital expenditure incurred on the provision of the fixture'. I have some
sympathy with him because he faced the almost impossible task of proving a
negative covering a period from 1975 back into the mists of the last century.
It seems that not even the Revenue records could assist Mr Rivett in his task
and he was compelled therefore to rely upon mere assertion and supposition…In my judgment, on the balance of probabilities, it is
probable that either the Great Western Railway Co or British Rail became
entitled to an allowance prior to 1976 (and therefore before 1989) in respect
of capital expenditure on the railway line as demised to the company by the
long lease.”
43. We found that
this case confirmed our view that in the circumstances of this appeal, the
burden of proof must lie with the Appellants to show that there had been no
previous claim made by the vendors to capital allowances.
44. The Appellants
have failed to discharge this burden of proof; it is quite simply unknown
whether or not Mr and Mrs Jones made a claim and therefore the appeal must fail
as being invalidated by Section 185 (2) (b) CAA 2001.
45. Even if that
were not the case, we were satisfied on the balance of probabilities that the
evidence pointed to the fact that a claim had been made, taking into account
the vendors’ awareness of the potential claim and the substantial increase in
their capital allowance claim in respect of plant and machinery for the year
2003/2004 (£68,811) as compared to the previous year (£10,758).
46. Our finding on
the balance of probabilities that a claim was made does not bar the Appellants
from making a claim, however, in so finding Section 185 CAA 2001 becomes
applicable in capping the amount on which the Appellants can claim to the
disposal value that the vendors were required to bring into account.
47. We do not find
that the submission of the Appellant that HMRC must prove that the conditions
of Section 185 CAA 2001 are satisfied is correct. The wording of Section 185
(1) (d) is that the owner is/ has been required to bring the disposal value of
the plant or machinery into account as a result of having made a claim in respect
of that other expenditure. If the burden is on the Appellant to show that the
amendment made to the return was incorrect and the burden remains on the
Appellant to show whether or not there was a claim made by the vendors, it
follows that the onus was on the Appellants to enquire as to the disposal value
used by the vendors.
48. On Mr Lester’s
own evidence, no enquiries were made as to whether a claim would be made or the
figures to be used should a claim be made. HMRC are unable to assist as there
is no requirement for details to be given as to how capital allowances are
calculated in a Self Assessment Tax return and therefore the records held by
HMRC provide no clarification in this regard.
49. The case of Fitton
v Gilders and Heaton (H M Inspector of Taxes) 36 TC 233 on
appeal dealt with the issue of apportionment under Section
329 (1) Income Tax Act 1952. It was held “the Commissioners function under Section
326 (1) is not necessarily to discover what was the intention of the parties;
it is to make a just apportionment. And they have jurisdiction to do that, as I
have said, notwithstanding that the apportionment at which they arrived may be
inconsistent with the intention of the parties as discovered from the clear
language of the agreement to which the parties put their names”
50. We agreed that
we are not bound by the terms of the sale agreement between Mr and Mrs Jones
and the Appellants in this case. However on the limited evidence available to
us, this was an “arms length” transaction where the figures apportioned within
the sale agreement were agreed by the Appellants and therefore in the absence
of any further evidence we could not find any just and reasonable basis upon
which to make an apportionment.
51. Given the
limited evidence available in this case and the lack of any information as to
whether the vendors had made a claim for capital allowances or, if so, the
disposal value used by them, we found HMRC’s decision to disallow the
Appellant’s claim and amend the their tax return for the year ended 5 April
2004 to be entirely reasonable. We were satisfied that the Appellants had not
discharged the burden of proof in this case or shown that the amendment made by
HMRC was incorrect.
52. The appeal is
dismissed.
53. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 8 June 2011
