The Gazette 1985

GAZETTE

APRIL 1985

In the case before him, Judge Sheridan noted that Mrs. A.E. did the farm work for her uncle, any housework and more or less what he asked her to do. She herded the cattle each day, checking to see that all was in order, and looked after the management of the farm and buildings. Mrs. A.E. also did a certain amount of fencing. Because she was also involved in raising her own family, she could not take a job elsewhere by reason of her involvement in her uncle's business 10 . Judge Sheridan emphasised that the management of the lands was Mrs. A.E.'s prime concern, apart from her family, and that she attempted to add material value to the land. He said that she did work of lasting value and that the business would have collapsed but for her activities 11 . He therefore concluded that she "worked substantially on a full-time basis" in her uncle's business so as to fall within the terms of the relief. Generally speaking, therefore, whether a nephew has worked substantially on a full-time basis is a question of fact to be decided by the Court on the evidence put before it. Some possible factors in establishing this might be Income Tax Returns, or evidence of being an employee, such as an employment contract. (3) 'Five years ending on the date of the gift or inheritance' The nephew must work substantially on a full-time basis for a period of 5 years ending on the date of the gift or inheritance. Accordingly, if a nephew worked in his uncle's business for 10 years, and then left to work abroad and his uncle died 6 months after his departure leaving the business to his nephew, the nephew could not avail of the relief because of the six month gap. It is important to note that the five years must end on the date of the gift or inheritance. This date is defined in Section 2 Capital Acquisitions Tax Act 1976, broadly speaking, as the date the nephew becomes "entitled in possession" 12 . Thus, if a farmer gifted his land to a nephew, subject to a power or revocation vested in him in the event of the nephew ceasing to farm the land, and the nephew worked the land until his uncle's death, the power not having been exercised, the relief would not be available, because the "date of the inheritance" would be the date of the uncle's death 13 . Because the nephew would have been farming of his own accord for the preceding two years, and would not have been assisting in the carrying on of his uncle's business, he would not have been working for five years ending on the date of the inheritance. If however, in a similar situation, a nephew received land subject to the condition that if he stopped farming, it was to go to his younger brother, then the relief would apply. The nephew would be entitled in possession, subject to being disentitled if he ceased farming, and the date of gift would be the date of transfer. (4) A. Trade, Business, Profession, Office or Employment' The 'Favourite Nephew' relief applies to property used in the course of a trade, business, profession, office or employment and to shares in a company carrying on one of these activities. None of these terms is defined in the Capital Acquisi- tions Tax Act 1976. However, there is a good deal of judicial discussion of the meaning of trade, profession, office and employment in cases involving Income Tax 14 and it is probable that these principles would apply.

"Business" is wider than "trade" or "profession". The meaning of "business" was of central importance in A.E. - -v- Revenue Commissioners, in that the Revenue Commissioners argued that the letting of land could not be a "business" within the terms of the relieving provision. Judge Sheridan did not agree. He looked at the situation in the light of the fact that the disponer was an ". . . ageing man living alone, unable, through advancing years, to engage in husbandry or agriculture with the same intensity as formerly" 15 . He stated that a failing or indeed failed business is nevertheless a business, and that profit or an intention to make a profit was not an essential part of the legal definition of a trade or business 16 . Judge Sheridan adopted the definition put forward by Lindley L.J. in the English case of Rolls -v- Miller 11 : ". . . the word [business] means almost anything which is an occupation as distinguished from a pleasure — anything which is an occupation or duty which requires attention as a business". It was noted that the term "business" could not refer to isolated transactions 18 and that it would have to be "habitually and systematically exercised" 19 . In the case before him, he characterised the "business" as 20 DO YOU WANT TO IMPROVE YOUR CLIENT SERVICES AND YOUR FEE INCOME? The provisions of the Companies Acts 1963 to 1983 provide a legislative framework within which all companies incorporated in the Republic of Ireland must operate. To assist you and your clients to fulfil your obligations we provide the following company secretarial services:- • Advising on the legislation and arrangements necessary for the holding of Directors and General Meetings. • Preparation of statutory returns prescribed under the Companies Acts. • Maintaining the Minute Book and the statutory Registers. • Advising on the implications of existing and new legislation. • Assistance with Stamp and Capital duty mitiga- tion schemes. • Acting as Secretary and Registrar. Regardless of the size of your portfolio, our expertise can provide you with an excellent oppor- tunity of developing your client services and your fee income; if you already provide a company secretarial service, contact us and discover how we can work together to make it more efficient and more profitable. For further information contact Joseph A. Hickey. ". .. letting out the farm particularly with regard to • the custom of the area which required the person who let out the farm to engage in herding of stock for the person taking the land".

PEARSE TRUST COMPANY 18 Merrion Square, Dublin 2. Tel: (01) 767261

92