The Gazette 1989

GAZETTE.

SEPTEMBER 1989

was considered and given a wide interpretation in the AE case, where it was of central importance. In that case the taxpayer had received a gift of her uncle's farm. Prior to the gift the land had not been farmed actively by the uncle, but had been let to a third party as grazing for cattle. Under local cus- tom, incorporated in the grazing agreement, the uncle was respons- ible for herding the cattle each day and for reporting any eventualities. The taxpayer performed her uncle's duties and visited the farm twice a day to herd the cattle, to examine the fencing and to check that the cattle were safe. Any farm pofits and the letting monies were pay- able solely to the uncle. The Revenue Commissioners argued that the taxpayer could not avail of the relief under the old Paragraph 9 on the basis that her uncle's letting agreement did not cons t i t u te a business. Judge Sheridan did not agree. He looked at the situation in the light of the fact that the disponer was an 6 "ageing man living alone, unable, through advancing years, to engage in husbandry or agriculture with the same intensity as formerly." He stated that a failing or, indeed, failed business is nevertheless a business and that profit or an intention to make a business was not an essential part of the legal definition of the trade or business. He adopted the definition of Lindley L.J. in the case of Rolls -v- Miller: 1 ". . . the word (business) means almost anything wh i ch is an occupation as distinguished from a pleasure - anything which is an occupation or duty which requires attention as a business." He noted that the term business could not refer to isolated transactions and that it would have to be 8 "habitu- ally and systematically exercised". In the case before him, Judge Sheridan categorised the business as: 9 " . . . letting of the farm, particularly with regard to the custom of the area which required the person who let out the farm to engage in herding the stock from the person taking the land". Section 83 FA 1989 does not define "business" and accordingly it wou ld appear t hat Judge Sheridan's definition remains un- altered. The definition is capable of encompassing a wide range of activities. Whether or not a particu-

Irish Assessment and Guidance Service

IAGS

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\ -p Skerries Medical Centre, Strand Street, Skerries, Co. Dublin. \ / / Telephone: (01)491717, 490420, 490429 Fax:(046)28852 V Psychological, Educational and Career Consultants IAGS FOR PROFESSIONAL APPRAISAL OF EDUCATION AND CAREER PROSPECTS IN PERSONAL INJURY CASES

lar activity qualifies for the relief will depend on the circumstances of each case. (2) Shares in a private trading company The assets can also comprise shares in a company. Company is defined as a private trading com- pany controlled by the uncle of which the uncle is a director. "Pivate Trading Company" is defined by Section 16 Sub-Section (2) CATA 1976 as a private com- pany which is not a private non- trading company within Section 17 CATA, 1976. Broadly speaking, a private company is a company with not more than 50 shareholders, which has not issued shares as a result of a public invitation and which is under the control of not more than five persons. Section 17 defines a private non-trading com- pany as a private company the income of which consists wholly or mainly of investment income and the property of which consists wholly or mainly of property from which investment income is de- rived. Effectively, therefore, a private trading company means a company carrying on a trade, busi- ness or profession. The company must be controlled by the uncle. This is defined in Paragraph 9 as a company under the control of either the uncle, his nominees, or the trustees of a settlement made by him. Control is defined by Section 16 sub-section (4) CATA 1976 and generally in- cludes having greater than 50% of the voting power, or control of the Board of Directors, or an entitle- ment to more than 50% of the dividends, or to 50% of the nominal value of the shares in the company. These rules in Paragraph 9 regarding control are similar to the rules for private companies in the Capital Acquisitions Tax Act. As originally drafted, Paragraph 9

referred to "office or employment" of the uncle and to shares in a company carrying on a trade, business or profession. The old rules were, to say the least, difficult to interpret and the new provisions are welcome. "Substantially on a full-time basis." The nephew must carry on or assist in carrying on the trade, business or profession "substanti- ally on a full-time basis". Sub- stantially on a full-time basis was not defined in paragraph 9 as originally enacted. It was con- sidered in detail by Judge Sheridan in the AE case, where it was given a broad interpretation. In that case Judge Sheridan pointed out that the term was not a term of art. In the absence of authority he proposed the following definition: 10 ". . . the continued presence of a niece or nephew on a day to day basis whereby their labour (including expertise) is put at the disposal of the disponer whereby material benefit is con- ferred on the disponer's business". He emphasised that the terms of the relief did not require that the disponer be in loco parentis to the beneficiary, nor that the nephew should live wi th the disponer. In the case before him, Judge Sheridan noted that the taxpayer 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. The taxpayer also did a certain amount of fencing. Because she was involved in raising her own family, she could not take a job elsewhere. The Judge emphasised that the management of the land was the taxpayer'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 busi-

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