TC09530 - [2025] UKFTT 00566 (TC)

Fecha: 22-May-2025

Activities not for the purposes of a trade which the company was preparing to carry on or with a view to its starting to carry on a trade

Activities not for the purposes of a trade which the company was preparing to carry on or with a view to its starting to carry on a trade

The Respondents’ submissions

28.

In that regard, the Respondents accept the general proposition that a property which has initially been acquired as an investment can subsequently be appropriated for use in the course of a trade – see Simmons v Inland Revenue Commissioners [1980] 1 WLR 1196 at 1199A. However, they say that, in the present case, no such appropriation has yet taken place. Whilst PSSL might have had “a possible future intention to develop” the Property during the relevant period, that amounted to no more than an intention to change the character of the Property at a later date if PSSL began development. They say that, until then, the Property remained an investment asset and therefore, during the relevant period, the activities of the company were not for the purposes of a trade that it was preparing to carry on or with a view to its starting to carry on a trade.

29.

In support of the above argument, the Respondents say that:

(1)

the seeking of planning permission is not evidence in and of itself of an intention to start a trade because planning permission can also be sought simply to increase the value of the subject property and without any intention of disposing of the subject property at the increased value;

(2)

the planning applications in this case were in some cases made by third parties and not the company itself;

(3)

the amounts spent by the company on architects and planning consultants in the 2017 AP and the 2018 AP were modest, amounting to only £1,793.10 in aggregate. This is considerably smaller than the amounts of rental income which were received by the company over the relevant period; and

(4)

no physical activity in the course of property development took place during the relevant period or, in fact, has taken place at any point thereafter. The mere fact that various planning applications relating to the Property were made and that the company engaged architects and planning consultants to help in that regard is irrelevant because no subsequent re–development has ever taken place.

30.

The Respondents add that the mere fact that SW and CP participated in other joint venture companies which carried out residential property re–development is irrelevant in the present context because each company is a separate legal entity and therefore its tax position, and whether or not its activities amounted to investment or trading, is to be considered in the light of its own activities and not the activities of its affiliates – see Mark Stolkin and others v The Commissioners for His Majesty’s Revenue and Customs [2024] UKFTT 00160 (“Stolkin”) at paragraphs [107] and [143].