John Douglas Wardle v The Commissioners for HMRC

John Douglas Wardle v The Commissioners for HMRC

The Tribunal held that the correct legal test for commencement of trade is that in Mansell, as approved in Tower MCashback and Hunt, not the narrower Birmingham District Cattle test. Applying this, the LLP had set up its business structure, organised management and finance, entered into operational contracts (including the Power Purchase Agreement, Feedstock Management Agreement, and O&M Contract), and put money at risk. These operational activities, even though the plant was not yet generating electricity, were sufficient to constitute trading for the purposes of Entrepreneurs’ Relief. Thus, the LLP was trading during the relevant period and the Appellant was entitled to relief.

Parties
Appellant: Mr John Douglas Wardle; Respondents: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
27 June 2024
Procedural Posture
Tax Appeal / First Tier Tribunal Judgment
Outcome
Appeal allowed
Legal Topics
Capital Gains Tax, Entrepreneurs’ Relief, Business Asset Disposal Relief, Commencement of Trading, Material Disposal of Business Assets
Tax Law Capital Gains Tax Entrepreneurs’ Relief Business Asset Disposal Relief Commencement of Trading Material Disposal of Business Assets

Case Brief

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Parties

Mr John Douglas Wardle

Appellant

The Commissioners for His Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal Judgment

Legal Issues

  1. 1 Whether Biomass UK No.1 LLP was trading for the purposes of Entrepreneurs’ Relief under TCGA 1992 s.169S(1) at the relevant time
  2. 2 Whether the correct legal test for commencement of trade was applied

Ratio Decidendi

The Tribunal held that the correct legal test for commencement of trade is that in Mansell, as approved in Tower MCashback and Hunt, not the narrower Birmingham District Cattle test. Applying this, the LLP had set up its business structure, organised management and finance, entered into operational contracts (including the Power Purchase Agreement, Feedstock Management Agreement, and O&M Contract), and put money at risk. These operational activities, even though the plant was not yet generating electricity, were sufficient to constitute trading for the purposes of Entrepreneurs’ Relief. Thus, the LLP was trading during the relevant period and the Appellant was entitled to relief.

Court Disposition

Appeal allowed

Orders

  • The closure notice denying Entrepreneurs’ Relief is set aside.
  • The Appellant’s claim for Entrepreneurs’ Relief is allowed.