Simmons (as liquidator of Lionel Simmons Properties Ltd) v Inland Revenue Commissioners
[1980] 2 All ER 798(Decision by: Lord Salmon)
Between: Simmons (as liquidator of Lionel Simmons Properties Ltd)
And: Inland Revenue Commissioners
Judges:
Lord Wilberforce
Viscount Dilhorne
Lord SalmonLord Scarman
Lord Roskill
Subject References:
Income tax
Profits
Trading receipts
Land
Disposal
Taxpayer acquiring land for development
Acquisition for building up a portfolio of investments sufficient for the flotation of a public company
Sale of land in view of deterioration of business prospects
Whether surplus on sale taxable as taxpayer's trading receipts
Case References:
Cunliffe v Goodman - [1950] 1 All ER 720; [1950] 2 KB 237, CA; 31(2) Digest (Reissue) 641, 5217
Edwards (Inspector of Taxes) v Bairstow - [1955] 3 All ER 48; [1956] AC 14; [1955] 3 WLR 410; 36 Tax Cas 207; 34 ATC 198; [1955] TR 209; 48 R & IT 534, HL; 28(1) Digest (Reissue) 566, 2089
Sharkey (Inspector of Taxes) v Wernher - [1955] 3 All ER 493; [1956] AC 58; [1955] 3 WLR 671; 36 Tax Cas 275; 34 ATC 263; [1955] TR 277; 48 R & IT 739, HL; 28(1) Digest (Reissue) 123, 363
Judgment date: 19 June 1980
Decision by:
Lord Salmon
My Lords, I gratefully adopt and will not repeat my noble and learned friend Lord Wilberforce's lucid summary of all the facts found by the commissioners. Since I concur generally in the conclusions reached by my noble and learned friend, I shall only add a few observations of my own.
I do not believe that this appeal raises any question of law, nor any question whether the commissioners' primary findings of fact can be overruled. Clearly they cannot. I do not, however, consider that all the inferences which the commissioners drew from those findings can be accepted, especially the inference which led them to the conclusion that the sale of the relevant properties constituted a sale of trading stock. This conclusion was plainly wrong and should accordingly be rejected (see Edwards v Bairstow [1955] 3 All ER 48 at 57, [1956] AC 14 at 35-36 per Lord Radcliffe).
The Simmons group of companies, bar one, were formed as property investment companies. The commissioners accepted that the acquisitions of the properties with which those companies were concerned ([1978] STC 344 at 355)-
'were initially entered into primarily for the purposes of creating and retaining investments, and not primarily for the purposes of immediate sales after development ... [and that] the overall and eventual ambition or purpose of Mr Simmons personally was the flotation of a public company when sufficient and suitable investments had been gathered together.'
In 1962 the Simmons property investment group of companies formed an association with Bishopsgate Property and General Investment Ltd ('Bishopsgate'), an associate of Hambros Bank which specialised in bringing investment companies to the market. On 4 October 1963 the Simmons group of companies entered into an agreement with Bishopsgate not to alter their business from that of property holding. Bishopsgate had an interest of 25% in each of the properties acquired by the Simmons group after its association with Bishopsgate. It is plain that each of these properties was acquired as an investment. There is certainly no evidence that they were acquired as trading stock. The decision made in October 1966 to liquidate the Simmons group of investment companies was because the prospects of these investments had seriously deteriorated. In such circumstances the realisation of capital and withdrawal of the investments certainly cannot constitute the sale of trading stock. There was no evidence and indeed no finding that any of the acquired properties were acquired or even treated as trading stock. They were acquired solely as investments which eventually turned out to be unsatisfactory.
A passage in the findings of the commissioners was strongly relied on by the respondents. It reads: 'The decision to liquidate was in our view not inconsistent with the original aim-to create investments for retention where possible, or where not possible for turning to account by way of trade' ([1978] STC 344 at 356). A strange concept indeed. An investment does not turn into trading stock because it is sold. Entirely agree with my noble and learned friend Lord Wilberforce that no such concept can be accepted.
My Lords, I would accordingly allow the appeal.