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Cite as: [2006] UKVAT V19827

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Marcel Brogden v Revenue & Customs [2006] UKVAT V19827 (10 October 2006)

19827

REGISTRATION – the Appellant started selling own and wife's personal collections of various items on eBay – whether conducting a business – no account taken of prior ownership of goods – whether should be registered as a partnership – whether acting as agent for wife

LONDON TRIBUNAL CENTRE

Appellant

MARCEL BROGDEN

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: MISS J C GORT (Chairman)

DR M JAMES

Sitting in public in Bristol on 28 July 2006

Mr I Evans, Accountant, appeared on behalf of the Appellant

Miss S Rahman, Counsel instructed by the Solicitor's Office appeared on behalf of the Respondents

© CROWN COPYRIGHT 2006

DECISION

This is an appeal against a decision of the Commissioners backdating the Appellant's effective date of registration from 1 February 2005 to 1 April 2004. The decision was contained in a letter dated 6 December 2005. The Statement of Case sets out that the Appellant was liable to a penalty, but no penalty was in fact ever imposed.

The Appellant's business is the purchase and sale of collectables, which he runs from his home in Barnstable, Devon. The grounds of appeal are stated to be: "In that we disagree with the decision to backdate VAT registration. The items being sold were from a private collection established over 20 years to include some inheritance, therefore these items are outside the scope for VAT."

The legislation

Paragraph 1(1) Schedule 1 of the VAT Act 1994 states:

"Subject to sub-paragraphs (3) to (7) below, a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule –

(a) at the end of any month, if the value of his taxable supplies in the period of one year then ending has exceeded (the limit then prevailing)".

Paragraph 5(1) of Schedule 1 of the VAT Act 1994 states:

"A person who becomes liable to be registered by virtue of Paragraph 1(1)(a) above shall notify the Commissioners of the liability within 30 days of the end of the relevant month".

Paragraph 5(2) of Schedule 1 of the VAT Act 1994 states:

"The Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the month following the relevant month or from such earlier date as may be agreed between them and him."

Paragraph 5(3) of Schedule 1 of the VAT Act 1994 states:

"In this paragraph `the relevant month', in relation to a person who becomes liable to be registered by virtue of paragraph 1(1)(a) above, means the month at the end of which he becomes liable to be so registered".

Section 4(1) of the VAT Act 1994 states:

"VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him".

Section 94(1) of the VAT Act 1994 defines business as including any trade, profession or vocation.

The Facts

Up until April 2003 both Mr and Mrs Brogden had been in full-time employment. They shared a common interest in collecting, and would spend a lot of their free time going to sales of various kinds, including trade fairs. We were shown photographs of the inside of their house which is crammed from floor to ceiling with various items displayed in groups such as ceramic toast racks, crocodile skin suitcases, Victorian lace-up and other boots and shoes, and kitchen containers. These are but a few of the considerable number of different types of items on the shelves, in cabinets and hanging on the walls of the house. Mrs Brogden gave evidence to us that she had been a collector since she was a child, having been brought up with antiques, and having inherited a large number of items such as furniture, silver, china and jewellery from both her parents, who had been avid collectors. Her grandmother had died in 1980 and had also left her some items. She had regularly attended antique fairs, and from the age of 11 had been employed in her uncle's bakery and she would use the money she had received from this employment to buy items.

Mr and Mrs Brogden had married in 1983, he also having a general interest in antiques. They became known at the various antique fairs by the traders, and were able to pay the trade entrance fee rather than that paid by the general public. The trade pass gave them a saving on the price of the entrance fee if they took friends or relatives with them to defray the cost. The other advantage of having a trade pass, which they had acquired in 2000, was that they could go to the fairs at 7am, whereas the general public could not enter until about noon. They therefore had better access to the items on sale.

At some stage in 2002 Mrs Brogden suggested that a computer be purchased in order that they could buy items on eBay. In June 2002 a Paypal account was opened by her which enabled her to buy items on eBay. The account was in fact opened in the Appellant's name, not Mrs Brogden's. Mrs Brogden purchased some 30 to 40 items, all of which, bar one, she still possesses. It was her clear evidence that these items had not been bought with any intention of resale, nor had any attempt been made to resell them. The Paypal accounts show that nothing was sold on eBay prior to late March 2003.

In February 2003 the Appellant's father died suddenly and unexpectedly. This left the Appellant ill and depressed and he was signed off work for medical reasons, initially for a period of three months, by his doctor. At the time he was working at Sainsburys, who said that from April they would not pay his full salary, but he would receive £1000 per month less than usual. At that stage he was still employed by Sainsburys. Mrs Brogden was worried about the Appellant's state of mind, and, in order to attempt to get him out of his depression, she suggested that there were plenty of things they could sell on eBay, the suggestion was made to keep up both his morale and his salary. They had never made any savings. A digital camera was therefore purchased in order to photograph the items and show them on eBay, this purchase was made in about March 2003. The first item sold on eBay by the Appellant was Mrs Brogden's grandmother's Asprey case, which was a 1900 vanity case fitted with silver brushes, combs and bottles, which was sold for about £299. Receipts went into the Appellant and Mrs Brogden's joint bank account.

In April 2003 Mrs Brogden herself became unwell, and in about May learnt that, amongst other things, she had breast cancer. This necessitated a full mastectomy which was performed on 11 August 2003. She had previously been working as a receptionist/advertising manager for a local newspaper. In October 2003 she tried to return to work, but found she was unable to do so. In the meantime the Appellant had been signed off work for a total of twelve months because of stress and depression, and in May 2004 he was dismissed by Sainsburys because of his unfitness to work. In April 2004 Sainsburys had, unexpectedly, paid him an amount of £12,180.68, presumably as severance pay, although there had been no previous indication that this payment would be forthcoming.

Mrs Brogden told the Tribunal that the Paypal account had been registered in the Appellant's name, rather than her own name because she had no idea that she would be ill subsequently and would herself be involved in the selling, although, since it was initially used by her for purchasing items, it is curious that the account was not opened in her name.

Apart from the Asprey's case, crocodile luggage was also sold early on, and a leather briefcase which Mrs Brogden had used for work. The purchaser of this item was a dealer from the Kings Road who specialised in vintage luggage. He asked for a VAT receipt, and was told that he could not be given one because it was a personal item. There followed a series of unpleasant emails, and it appears that the owner of the shop contacted the Commissioners suggesting that the Brogdens were running a business which should be investigated.

On 31 January 2005 a Mr Stephen Lomax, of HMRC in Exeter, visited Mr Brogden under the impression that Mr Brogden had been running a £300,000 per annum business over the internet. At the time of the visit Mr Lomax had seen a letter written to the Inland Revenue by Mr Brogden on 14 December 2004 stating inter alia that between April 2003 and 2004, whilst he had been employed by Sainsburys, he had been ill and Sainsburys would not pay him any sick pay for those twelve months, because he did not wish to claim any state benefits, he had decided to raise enough money each month to live on by selling general personal items from the contents of the house. These sales were done at car boat sales, flea markets and on eBay. No records had been kept of these items. Only items which had been in the house for many years had been sold. Mr Brogden estimated that during that time he had sold £13,608 worth of personal items, and the tax form which accompanied that letter gives the date of commencement as the 6 April 2003, the total receipts as being £13,608 and the net profit being £6,558. By way of explanation for these unrealistic figures we set out below the figures seen by Mr Lomax which were considerably in excess of £50,000. Mr Brogden told us that prior to writing this letter, he had had a discussion over the telephone with the Inland Revenue and, because he did not know the exact amount of his receipts, he had been told to estimate them, which he had done at £13,000, given his need for £1,000 per month to make up for his loss of earnings. The officer he spoke to had told him not to put a round figure, but had suggested the £13,608 figure. There was no proper explanation given for the statement that Sainsburys had not paid him at all during that year, which was untrue, although his salary had been reduced by about £1,000 per month. It was, however, the case that the Brogdens were not aware that Sainsburys would ultimately be paying a lump sum by way of what appears to be severance pay.

Initially Mr Brogden had, on Mr Lomax's instruction, applied to be registered for value added tax on the 1 February 2005, giving the date of his first taxable supply as the 1 June 2004. The estimated value of the taxable supply in the next twelve months was given as £120,000. This form is dated the 31 January 2005, and the date of June 2004 was put in on Mr Lomax's advice. Prior to this period, following Mr Brogden's submission of his tax return, Mr Evans had written to the Inland Revenue suggesting that capital gains tax, not income tax was the appropriate tax in the circumstances. At the time of the hearing no official response had been received.

Considerable correspondence followed the meeting between Mr Lomax and the Appellant, and also between Mr Lomax and Mr Evans, who was acting for the Appellant at that time and throughout. From the bank statements it became apparent to Mr Lomax that far more than £1000 per month was being both paid into the account and withdrawn from it. The account was in joint names. Mr Lomax was eventually shown the trading receipts from the Paypal account on eBay, starting from the 1 June 2004, but was told that earlier documents were not available. In a letter dated the 21 October 2005 Mr Lomax referred to "a considerable amount of sales and purchases" during the period 1 April 2003 to April 30 2004. In fact the records which were later found by the Appellant show that in that period, whereas 38 items were bought, of those 28 are marked as having been purchased for Mrs Brogden's personal collection. We have not calculated the number of items sold but there are 17 itemised pages showing trading in this period, and the number of items sold on each page ranges between 16 and 25. There is therefore an average of 20 items sold on each sheet making a total of approximately 540 items being sold, which do represent a considerable amount, however, we do not consider that 38 items purchased, of which only 10 were for resale (a fact told to Mr Lomax) do represent a considerable amount.

In correspondence Mr Lomax repeatedly asks for any details or evidence of items purchased by Mr and Mrs Brogden at trade fairs, boot sales etc. He never received any such evidence and was told that it was impossible to reconstruct the records of such purchases. Mr Lomax was initially inclined to register the business as a partnership between Mr and Mrs Brogden, but was persuaded by a letter from Mr Evans that the bank account in joint names was a personal account, and not a business account, and that Mrs Brogden only played a very small role in the matter of the selling the items. Consequently he decided to register Mr Brogden alone, and his initial decision, which was contained in a letter dated the 16 November 2005, was to backdate Mr Brodgen's VAT registration to the 1 March 2004. This was because he had seen receipts into the bank totalling in excess of £63,000 for the period 1 February 2003 to the 31 January 2004, whilst the VAT threshold at the time was £56,000. He had included an amount of £4,000 which was money received from Sainsburys at the time. He had also seen total receipts exceeding £80,000 for the period 1 April 2003 to April 30 2004. £30,000 had come from Wells Fargo which related to internet sales, other credits paid in exceeded £35,000 and miscellaneous receipts, including £12,180 from Sainsburys, exceeded £17,000. Subsequently, by a letter dated 6 December 2005 Mr Lomax notified Mr Brogden that he had failed to take into account that in March 2003 there was a credit for £1,089.86 which was annotated as being "refund on kitchen units", and also in March 2003 there were a further three credits totalling £1,535.30 annotated as "Sainsbury share paid out". He accepted that these were non-business receipts, and therefore Mr Brogden had not exceeded the threshold until the twelve month period ending 29 February 2004, which moved the effective date of registration to the 1 April 2004.

It was not until July of 2006, after the decision to register the Appellant as from 1 April 2004 was made, that a box containing documents detailing all the early eBay sales was found and submitted to the Commissioners. Mr Lomax in his evidence said that these documents had not caused him to amend the effective date of registration. One document which was not available to Mr Lomax when he made his decision, shows that there was no activity between the 1 August 2002 and the 14 March 2003, when the first payment was received in the sum of £106. This was the sale of the Asprey's leather and silver fitted travelling case. We were not taken through the documents, which showed various items as they would have appeared on eBay and the email correspondence between the purchasers and the sellers. We were told that these documents showed that many of the items sold belonged to Mrs Brogden. However, apart from the fact that some of the emails are sent to "Dear Susan" and some of them are female items, it is not clear how we are supposed to conclude from the documents alone who was the original owner or purchaser of them. Mr Brogden had indicated on the earlier documents provided to Mr Lomax which items had been purchased for Mrs Brogden's personal use.

Mrs Brogden is a very decisive women, and in her evidence she was quite clear that the intention in selling off some of the items had been simply to give Mr Brogden something to do, and there had been no long-term intention to run a business. The majority of the items sold during the first year were boots and bags which in the main belonged to her, either by inheritance or because she had purchased them. Her own rate of purchasing items had always been considerably greater than that of her husband.

Mrs Brogden herself had been responsible for writing the letter in respect of the income tax return, and she had had the conversation with Mr Lee, the officer in question. She had been advised to put in a figure of something over £13,000, and to send a letter explaining the circumstances, which she had done. Even during the period when her husband was ill, she had continued going to fairs and purchasing items at the time because she was not in financial straits. She was adamant that she had not been buying things in order to sell them.

We accept Mrs Brogden's evidence that the cash which Mr Lomax had referred to of some £5,000 had been an advance from Direct Line in order to pay for the fitting of a new kitchen, other than £60 of that money which had come from health insurance. Mrs Brogden had always believed that Mr Brogden would recover and resume working. She herself had no financial worries during early 2003, not knowing that she was going to be ill or that her husband would not recover. She had withdrawn various sums of money at that time, and she was buying items at that stage. She was unable to explain two cash withdrawals made on 17 July in the sum of £200 and £300 respectively, and a further four cash withdrawals made on the 21 July 2003 in sums respectively of £200, £500, £500 and £300. A further cash withdrawal of £500 was made on the 22 July. She acknowledged that she was a high spender. Her own salary was not paid into the joint account, but was paid into a building society account to cover the mortgage. The bank account was used to run the house. In addition, she had Tessa and ISA accounts and money would be put into those accounts.

According to Mrs Brogden, prior to the 1 June 2004 she had never taken money out of the account in order to buy items for resale. Since the 1 June Mr Brogden had bought items to sell and those had remained in the cellar until they were sold. Mr Lomax had not been shown the cellar when she had shown him the house, which she had done because she had wanted him to understand that she was a collector.

Mr Brogden gave evidence of having had Menières disease, which had ultimately caused him to have to stop work. After the death of his father in 2003, and after becoming ill, he had become very worried about money. He accepted that in the letter to the Inland Revenue written on the 14 December 2004 it was incorrectly stated that he had no income at all between April 2003 and April 2004. However, his income had been considerably reduced in this period, and he had not expected to get the lump sum which he eventually received. He had made enquiries at his local tax office about registering for VAT and had been told that he should trade for a year before registering for VAT, and it was not necessary to get a separate bank account. He had only kept the necessary records from 1 June 2004 because that was the date when he considered that he had actually started trading. He acknowledged that Mrs Brogden was a spendthrift. Until May 2004 he had always expected to be going back to work. His version of what was kept in the cellar differed from Mrs Brogden's in that his evidence was that, having bought luggage at a trade fair, it was often necessary to restore it. He would do the repairs and cleaning up of the items in the cellar which was used as a workroom rather than a storeroom.

The Respondents' case

The Respondents' case was that there was substantially no difference in the trading before the 1 June 2004 and after it. Whilst Mr Brogden had acknowledged that he visited antique fairs, it was submitted that the expenditure was too frequent for the items purchased just to be for personal use. There was a conflict of evidence between Mr and Mrs Brogden as to whether their financial situation was bad or not; Mrs Brogden herself had not been earning great amounts of money, her salary being just sufficient to discharge the mortgage, on the other hand plenty of money had been coming in from eBay. It was further submitted by Miss Rahman that the evidence was not sufficient for the Commissioners to be satisfied as to which of the items sold were heirlooms, and which were not. No insurance valuations or photographs had been available, as might be expected. Miss Rahman submitted that it was not plausible to suggest that several years' worth of stock was available to Mr and Mrs Brogden.

The Commissioners relied on Section 94(1) of the VAT Act 1994 which defined business as including any trade, profession or vocation. In the Statement of Case the cases of Morrisons Academy Boarding Houses Association [1978] STC 1 and Lord Fisher, [1981] STC 238 are referred to. Unfortunately we were not provided with these cases at the hearing. In the Statement of Case it is written: "From these and other cases the Commissioners have developed a business test whose construction can act as indicators (sic) of a 'business' although a business may have some but not all of the features. The test consists of six questions which are as follows:

(a) Is the activity a serious undertaking earnestly pursued?

(b) Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity?

(c) Does the activity have a certain measure of substance in terms of the quarterly or annual value of the taxable supplies made?

(d) Is the activity conducted in a regular manner and on sound and recognised business principles?

(e) Is the activity predominantly concerned with the making of taxable supplies for a consideration?

(f) Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?"

The answers to these questions were given in the Statement of Case as follows:

"a EBay feedback sheets show purchase and sales activity over the period concerned.

b The eBay feedback sheets demonstrate that on average a transaction was taking place every two to three days.

c Cash, cheque and credit receipts are considerable, taking the Appellant over the threshold level for VAT registration in a twelve month period from March 2003 to February 2004.

d Trading on eBay is the way many people earn their livelihood. The items sold by the Appellant are of a nature frequently sold on eBay. The Appellant did not keep records.

e Yes. As indicated by the volume of sales and purchases and the associated income and expenditure.

f Yes. Sales of this nature are common to the internet, High Street, car boot sales and flea markets etc."

The Statement of Case continues that, for the above reasons, the registration date of 1 April 2004 and the belated notification of penalty were correct in fact and law. However, as stated above, no belated notification penalty was ever issued in this case and it is not a matter with which we are concerned. It would have been helpful if the Commissioners had provided the Tribunal with copies of the reports on which they rely, and if a skeleton argument had been provided.

The Appellant's case

The Appellant's case was that the majority of items sold on eBay at the time in question were from the Appellant's and Mrs Brogden's own personal collections, and the larger number came from Mrs Brogden's collection, not Mr Brogden's. Furthermore, the most important principle to be derived from the Lord Fisher case was that intent and forethought were necessary at the time of the purchase of the items, whereas here there had been no intention to sell at the time the items were purchased, and in selling the items Mr Brogden had not been concerned with making a profit, but with raising money to live on. The Tribunal was referred to the case of Customs and Excise v Morrisons Academy Boarding Houses Association (supra), which related to a non-profit organisation, whose purpose was to provide properly equipped boarding houses for the accommodation of resident pupils. The activities of the Association were found to be indistinguishable from that of a commercial boarding house, except for the fact that it did not aim to make a profit. The Tribunal in that case had held that the Association was not carrying on a business because its activities were not carried on with the object of making a profit, and this was also the case here.

The Tribunal was also referred to the case of Simmons v Inland Revenue Commissioners [1980] 2 ALL ER 798 at page 800 e to f where Lord Wilberforth said that trading required an intention to trade; normally the question to be asked was whether the intention existed at the time of the acquisition, and was it acquired with the intention of disposing of it at a profit? In the present case it was submitted that there had been no such intention at the time the items were purchased.

It was further submitted by Mr Evans that both these cases and Lord Fisher (supra) showed that it was necessary for there to be an intention to make taxable supplies to consumers for a consideration, and to do so deliberately. In the present case no taxable supplies were made, either at the time of the acquisition or thereafter, as the supplies were of a private collection and there had existed no intention to trade in antiques.

The Tribunal was also referred to the case of The Mellerstain Trust v HM Customs and Excise (no reference given and no copy produced) where it was held that it was clear from Section 21 of the VAT Act 1983 that the section was only intended to cover the case of a supply made at a time when a taxable person was carrying on a business, and not the case of supplies made in order to help a business which was not yet in existence.

With regard to the six points identified by the Commissioners from the Lord Fisher case, the Appellant's answers were as follows:

(a) No significant purchase activity existed over the period concerned. The eBay feedback sheets showed purchases over the 2003/2004 period as being below ten per month which was within an acceptable boundary as personal items. Sales were in excess of 30 per month up until June 2004. From the period October 2002 to September 2004 a total of 187 purchases were made, which was a small percentage of the sales which reached 1041 items.

(b) There was almost no continuity with regard to purchases. Only one purchase was made in April 2003, only three in July 2003 and no purchases at all in the month of August, November and December whilst sales continued to increase.

(d) It was not accepted that the business was conducted on sound business principles which would involve the purchase of supplies with a view to making a profit. Further a sound business principle was to keep records of transactions for legal reasons which are both useful for the business and its customers, which did not exist here.

(e) Again the lack of purchases and the lack of intention to make a profit when obtaining personal items showed this was not the case.

(f) It was accepted that the sales of such a nature were common on the internet.

Reasons for Decision

Whilst the Commissioners are correct in finding that the Appellant exceeded the VAT threshold limit of £56,000 in the twelve months ending 29 February 2004, which would make him liable to register with effect from 1 April 2004, the question for us is whether, during that period the Appellant was properly to be regarded as a taxable person who was making taxable supplies in the course or furtherance of a business.

Whilst the meaning of "business" for the purpose of S.4(1) of the VAT Act is clearly laid down in the Morrisons Academy and Lord Fisher cases, as set out above, neither party referred us to Article 4 of the EC Sixth Council Directive which defines a taxable person as: "… any person who independently carries out in any place any economic activity specified in Paragraph 2, whatever the purpose or results of that activity." Paragraph 2 provides that: "The economic activities referred to in Paragraph 1 shall comprise … the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity." There is no question but that the Appellant in this case has been exploiting tangible property, but we consider that a prior question to be asked is where the property which is being exploited comes from, and who was the owner of that property at the time it was being sold. In this case the property which Mr Brogden, who is the only person the Commissioners have chosen to register for VAT purposes, was either not the owner of the property which was being sold, or was the joint owner. There is no evidence at any stage that the items which he sold were brought into the business by him, either by means of his purchasing them from Mrs Brogden, or by his agreeing to act as her agent, or pay her on a commission basis once the items were sold.

Mrs Brogden had been responsible for the letter to the Inland Revenue which was clearly misleading about the amount of business which was being conducted at the time, and also as to Mr Brogden's income from Sainsburys. That being said, however, we do accept her evidence as to the origin of the trading on eBay, and the fact that it was not until Mr Brogden finally lost his job with Sainsburys that it was decided to conduct a proper business buying and selling on eBay. We accept that the loss of income of approximately £1,000 a month was what occasioned Mr Brogden to start selling off items which were already in either their joint possession, or Mrs Brogden's possession alone. We also have no hesitation in accepting that a very large proportion of the items which were sold in the period 2003 to June 2004 were items which Mrs Brogden had either inherited, or had purchased herself, in which case Mrs Brogden might well be liable to capital gains tax on any sales of those items. The fact that it was Mr Brogden who was handling the sales and purchases on the eBay account does not of itself mean that the items being sold were part of a business being conducted by him.

We were not told of any move on the part of either Mr or Mrs Brogden to make any proper inventory of the items in the house which were to become part of Mr Brogden's business, once it had been decided that there should be a business. There is no issue before us as to whether or not there was subsequently a business being carried on by Mr Brogden, it being accepted by both Mr and Mrs Brogden that, as from June 2004, a business was on foot. We are not therefore required to consider what arrangements were made by Mr Brogden to acquire from Mrs Brogden her share of any jointly-owned assets, or those items which were hers alone, which were sold after that date.

We accept that Mr Lomax had a very difficult task to conduct. There were no sufficient records, he was not given a list, as he could have been, of the items which were sold on eBay which did belong to Mrs Brogden. He was not initially supplied with records relating to the earlier period at all, and when he did receive them, they only showed items which had been purchased for Mrs Brogden's own use, as opposed to items of hers which had been sold. However there was evidence of Mrs Brogden's ownership of many of the items which appears to have been ignored. No allowance for input tax was made by the Commissioners to reflect the value of those items which belonged either entirely or in part to Mrs Brogden. No consideration appears to have been given by the Commissioners to the question of whether or not Mr Brogden was acting as his wife's agent in carrying out this business and what effect this might have. No consideration was given to whether or not the margin scheme on second-hand goods should be applied.

Whilst we accept that the trading on eBay shows that very few purchases were made, in particular as compared with the sales, we have no evidence as to the amount which was being spent on purchases from trade fairs, which Mrs Brogden was certainly attending, and the evidence of the fairly substantial withdrawals from the joint bank account makes it likely that purchases were being made at those trade fairs of items, but there is no evidence that those items were then sold on eBay. Whilst the business was not conducted in a regular manner or on sound and recognised business principles, we do not take this to be a reflection of the fact that it was not a business, simply of the fact that Mr Brogden had not kept proper records, and the banking arrangements were not business-like. However, we accept that, because a very large number of the items were family items which had belonged to one or other or both parties, and had been originally purchased with no intention of selling them, no thought had been given to the need to keep a record of the price or date of purchase of those items, and the fact that there is no such record substantiates Mr Brogden's case that they were personal items.

The fact that the items which were sold in the early stages were those which had been either inherited or purchased with no intention of resale, and therefore there was no intention to make a profit at the time the items were acquired, is a clear indication that Mr Brogden was not conducting a business (see the case of Simmons (supra). We do not think it is open to the Commissioners to say that, because a very large turnover was achieved, this by itself is sufficient to render the Appellant's activities a business, without proper consideration having been given as to how the assets of the business were acquired, and who owned them at the time of sale. Because of the nature of the way the assets were acquired we consider that the appropriate tax to be levied in the early stages would have been capital gains tax.

We do not accept Miss Rahman's submission that the value of the goods sold in the course of the year indicates that it was not personal items that were being sold. From the photographs we have seen, and from a reference to Mr & Mrs Brogden's collection of ceramic toast racks in the book "British Ceramic Toast Racks for Collectors" which is dated 29 July 2001, we conclude that a substantial collection existed prior to the commencement of trading. We accept Mr Evans' submission that the disposal of private assets which were never acquired with the intention of selling them is a non-business and non-taxable activity. In the present case Mr Brogden only commenced his business when he himself first acquired goods with the intention of selling them, and that was not until June 2004.

This appeal is allowed. The Respondents to pay the Appellant's reasonable costs of and relating to this appeal with liberty to apply in respect of any disagreement relating to those costs.

MISS J C GORT

CHAIRMAN

RELEASED: 10 October 2006

LON/06/0043