TC09530 - [2025] UKFTT 00566 (TC)

We do not agree with the Respondents’ proposition that the activities of the company over the relevant period did not include activities 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. On the contrary, we think that the agreed facts make it apparent that the activities of the company over the relevant period did include such activities. It is clear that, over the relevant period, the company was taking active steps to progress the re–development of the Property. Those steps were the engagement of architects and planning consultants to draw up plans for the various re–developments as we have described in paragraph 11 above – see paragraphs 11(11) to 11(15) above in particular.

We see nothing in the points set out in paragraph 29 above to gainsay that conclusion.

As regards paragraph 29(1), it is true that, as a general proposition, in addition to being used as a step antecedent to the re–sale of a property at a profit, planning permission can be sought simply to increase the value of a property. However, we fail to see the relevance of that in the present context. The mere fact that PSSL could have been taking steps towards the obtaining of planning permission simply in order to increase the value of the Property and without any view to making a profit from the re–development of the Property is irrelevant in the light of the clear evidence to the effect that that was not its purpose in this case. On the contrary, the evidence shows that PSSL had determined that rental income alone would not produce a sufficient return from the Property and it was trying instead to derive a more acceptable return by facilitating the re–development of the Property.

As regards paragraph 29(2) above, we do not see how it matters that PSSL was not itself the applicant for some of the planning applications. The crucial fact is that it was taking steps itself to make a profit from the re–development of the Property by making common purpose with the relevant applicant and the other landowners. It is worth observing in that context that, although the option over 28 Panorama Road ultimately expired without being exercised, the fact that the company made a successful application for raising the ground on that property so that it could be included within a re–development involving part of the Property is consistent with the conclusion that the company was preparing to carry on a trade.

As regards paragraph 29(3) above, the fact that the expenditure which was incurred by PSSL in seeking to achieve its aim was relatively insubstantial and comfortably exceeded by the rental income which the company was receiving over the same period is also irrelevant. Whilst the quantum of the expenditure and the relationship which that quantum bore to the quantum of the investment income is potentially a relevant factor in considering the Respondents’ second challenge – which we address below – it has no relevance in determining whether the activity which led to the expenditure was for the purposes of a trade which the company was preparing to carry on or was with a view to its starting to carry on a trade.

Finally, as regards paragraph 29(4) above, the mere fact that the company did not actually carry out any re–development over the relevant period and has not done so since then because it has failed to obtain the necessary planning permission does not negate the fact that its purpose was clearly to obtain that planning permission and its activities over the relevant period were in accordance with that purpose. Just because the company was not successful, and has continued to be unsuccessful, in obtaining planning permission for the re–development, so that the re–development has yet to occur, does not mean that the activities which the company undertook during the relevant period with the intention that that planning permission would be secured 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.

For the reasons set out in paragraphs 31 to 36 above, we have concluded that the Respondents have failed to convince us of their first proposition. In our view, the activities of PSSL over the relevant period included activities 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.

It might be said that the above conclusion sits a little uneasily with the conclusion reached by the First–tier Tribunal (the “FTT”) in Stolkin where, on somewhat similar facts, the FTT concluded that the company in question was not a trading company. However, the facts in Stolkin are distinguishable from those in the present case. In particular:

The second point noted above is very relevant in the context of the point made by the Respondents and set out in paragraph 29(1) above, to the effect that, in certain cases, planning permission can be sought merely with the intention of increasing the value of a property and not with a view to profiting from the immediate re–development of the property. In Stolkin, the former appears to have been the case – see Stolkin at paragraph [158].