Abigail Wilmore v The Commissioners for HMRC
[2023] UKFTT 858 (TC)
Roger William Morgan & Anor v The Commissioners for HMRC
24 June 2024
[2024] UKFTT 565 (TC)
First-tier Tribunal
A couple transferred their property to their company to develop it. They argued they transferred ownership when construction began, not when legal paperwork was finished, avoiding taxes in 2015-16. The court agreed they transferred ownership early but the tax office wasn't properly notified in time about the earlier transfer, so only the later taxes were due.
Key Facts
- •Mr and Mrs Morgan transferred property ('Cranfield') to their company, D&R Property Development Ltd.
- •The dispute centers on whether a constructive trust arose in 2015-2016, impacting capital gains tax liability.
- •Plot 2 and Plot 3 development funded by Mr and Mrs Morgan's directors' loans to the company.
- •Legal title transferred to the company later, in 2014 and 2016 respectively.
- •HMRC issued closure notices and protective assessments for capital gains tax.
- •Mr and Mrs Morgan contended a constructive trust existed from the commencement of building works.
- •A declaration of trust was provided to HMRC in 2018.
- •The main issues were constructive trust, discovery assessment timeliness, proprietary estoppel, and allowable expenses.
Legal Principles
Constructive trust principles: common intention (express or inferred), detrimental reliance, unconscionability.
Jones v Kernott [2012] 1 AC 776, Gissing v Gissing [1971] AC 886, Grant v Edwards [1986] Ch 638, Yaxley v Gotts [2000] Ch 162, Herbert v Doyle [2010] EWCA Civ 1095.
Discovery assessment under section 29 of TMA 1970: hypothetical HMRC officer's awareness of insufficiency.
Beagles v HMRC [2018] UKUT 380 (TCC), Sanderson v HMRC [2016] EWCA Civ 19, HMRC v Lansdowne Partners Ltd Partnership [2011] EWCA Civ 1578.
Proprietary estoppel: representation or assurance, reliance, detriment.
Thorner v Majors [2009] UKHL 18.
Allowable expenses under section 38(1) of TCGA 1992: 'on his behalf' interpreted as agency.
Lowe v HMRC [2022] UKUT 84 (TCC).
Companies Act 2006, sections 190 and 195: substantial property transactions and voidable contracts.
Companies Act 2006.
Duomatic principle: unanimous shareholder assent binding as a resolution.
Re Duomatic Ltd [1969] 2 Ch 365, Rolfe v Rolfe [2010] EWHC 244 (Ch).
Outcomes
Appeals against closure notices for 2016-2017 allowed.
Constructive trust found to have arisen in 2015-2016, transferring beneficial interest to the company upon commencement of works.
Appeals against protective assessments for 2015-2016 dismissed.
Hypothetical HMRC officer could not reasonably have been expected to be aware of the insufficiency in 2015-2016 based on available information before the enquiry deadline.