News archive

Case in which the Portobello Park Action Group Association sought Judicial Review of the City of Edinburgh Council’s decision to appropriate part of Portobello Park in order to site a new Portobello High School. The action group argued that it was unlawful for the Council to appropriate the park, which is common good land, and even if they were, they were not entitled to do so without the permission of the court.

Although it was unclear exactly when the decision to appropriate the park had been reached, Lady Dorrian found that “at the very latest” the decision had been made in March 2010. As the action group did not bring the case until July 2011, there had been considerable delay which was indicative of taciturnity and acquiescence and Lady Dorrian dismissed the petition on the basis that a plea of mora had been established.

Although the successful plea of mora meant that it was not necessary to reach a judgement on the Council’s decision, Lady Dorrian indicated that if she had been required to do so, she would have found that the Council does have the power to appropriate inalienable common good land.   The Council’s powers in relation to appropriation and disposal of land are contained in sections 73 to 75 of the Local Government (Scotland) Act 1973. Lady Dorrian observed:

“Section 73 of the 1973 Act gives a local authority the widest powers to appropriate for the purpose of any function land vested in them for the purpose of any other function[1]… An equally wide general power of disposal is given under section 74, subject to a requirement to obtain the best price. Section 75 of the 1973 Act does two things. By subsection (1) it makes it clear that the provisions regarding appropriation or disposal of land apply to common good land where there is no question arising as to the right to alienate. Where such a question arises, under subsection (2) the power of disposal is limited, in that a local authority may only dispose of such land with the authority of, and subject to any conditions imposed by, the court. The power to appropriate such land remains unfettered.”

The full judgement is available from Scottish Courts here.

(NB: See appeal to Inner House)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Outer House case relating to a personal guarantee granted by Mr Kipling to Dunbar Bank.  The bank issued a charge for the payment of over £1m on Mr Kipling on the basis of the guarantee.

Mr Kipling argued amongst other things that he was not liable to pay as the bank had agreed to waive its right to recover under the guarantee.

Lord Pentland granted an interim suspension and interdict preventing the bank from taking diligence against Mr Kipling following on from the charge.

Subsequent to the granting of the interim interdict, Mr Kipling made amendments to his pleadings which led the bank to enrol a motion to recall the interim interdict, arguing that, given the amendments, the interim interdict was obtained in circumstances where Mr Kipling had failed to make full and frank disclosure on all matters material to his application for the interim orders and also that, following the amendments, the pleadings no longer disclosed a prima face case.

Lord Drummond Young refused the motion to recall the interim interdict.  Five general matters are relevant when considering the application for, or suspension of, such an order:

1. the court’s decision on an interim order is not a conclusive determination of the parties’ dispute;
2. the orders under consideration are merely temporary orders;
3. the court must give consideration to the balance of convenience. I.e. the prejudice that may occur to each of the parties in the event that an interim order is made or recalled (which requires a judgment as to both the likelihood and the seriousness of such prejudice);
4. the relative strength of the cases put forward by the parties;
5. the relative strength of the case that is said to justify an interim order must always be weighed with balance of convenience in the sense of likely prejudice.

As regards the matter before him, Lord Drummond Young found that, although the relative strengths of the cases tended to favour the bank (Mr Kipling’s case relied on the bank having given up its guarantee for no obvious return), given that, if the interim order were withdrawn, the bank could proceed with diligence and ultimately sequestration against Mr Kipling, Mr Kipling’s case on the balance of convenience outweighed the relative strength of the bank’s case.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Let’s start with “GERS”.  No not the blue half of Glasgow but the: “Government and Expenditure Revenue Scotland 2010-11”, or GERS for short.

The latest GERS report was published this week and shows that Scotland contributed 9.6% of UK public sector revenue and received 9.3% of total UK public sector expenditure.  These figures include a per capita share of UK debt interest payments.  Scotland’s population is 8.4% of the UK total.  Scotland’s estimated current budget balance in 2010-11, which is primarily day to day expenditure, was a deficit of £6.4 billion, or 4.4% of GDP.  These figures include a geographical share of North Sea revenues.  The corresponding UK figures were a deficit of £97.8 billion or 6.6% of GDP for the same year.  That includes 100% of North Sea revenues.

As is usually the case with statistics, and probably even more so with those which are used as ammunition in the fiscal powers debate, economists and other commentators will argue back and forth on what these facts and figures tell us.  That is why I agree with Reform Scotland’s call for the Office for Budget Responsibility to provide forecasts for all taxes raised in Scotland and not just those that might be devolved by the Scotland Bill.  Reform Scotland’s press release can be found here.  More on GERS can be found here.

Now to the fiscal powers debate.  This week it was Labour’s turn to announce a “commission that will look at how devolution should change and what further powers should be devolved to the Scottish Parliament.”  This means that none of the main political parties are arguing for the status quo or even just the Scotland Bill.  The Liberal Democrats have already announced their own commission and the Conservatives, or rather the UK Conservatives by way off the Prime Minister, have said that they will consider devolving further powers if Scotland votes no in 2014.

The announcement of yet another commission received quite a lot of media of coverage.  The fact that Labour think a second referendum will be required if Scotland votes “no” in 2014 was less commented upon.  I suspect that this will also be the view of both the Liberals and the Conservatives.  That clearly conflicts with the argument that Scotland needs an early referendum to stop “uncertainty”.  An article on this from the STV news website can be found here.

Aberdeen City Council is expected to apply for more than £90m of tax incremental funding (TIF) following a ‘yes’ vote in the Union Terrace Gardens referendum.  A report on this from the STV news website can be found here.  I have written before on why I support TIF and the type of thinking behind this type of idea.  The one caveat I have concerns the number of these projects. As was found in the United States, if too many projects are approved the ability to fund both old and future projects gets harder.  The Scottish Futures Trust is though well aware of what happened in places such as Illinois, where I worked as an attorney, and first came across TIF.  More on TIF can be found here.

I was not surprised to read that a last minute bid to stop the Scottish Government’s plan to levy a tax on supermarkets and large shops has been defeated.  The “Tesco tax”, as this proposal has been termed, will see retailers which sell alcohol and tobacco pay an extra £95m in business rates over the next three years.  A BBC news website piece on this can be found here.

Sometimes when you read a story about the workings of government, local or national, you just sigh.  This is one such story.  Whitehall departments have been criticised for overspending by £500m on schemes that were actually intended to save money.  The National Audit Office found that UK ministers failed to offer clear management for the setting up of pooled resource centres.  The aim was to stop costs being duplicated.  The ever excellent Labour MP Margaret Hodge, who chairs the House of Commons Public Accounts Committee, said that the overall figures provided: “a shockingly familiar story of spiralling costs and poor value for money”.  Will anyone be brought to account?  Will a gong have to be returned or a bonus forfeited?  I suspect not.  A BBC news website piece on this can be found here.

Now to the Budget debate.  For “debate” read “battle between and briefing against your coalition partners.”  There are a number of fronts in this battle.  These include how quickly to increase the personal allowance limit, whether to reduce higher rate pension tax relief, the possible introduction of a “Mansion” tax and whether to retain the 50p top rate of income tax.  Is it worth speculating as to the outcome of these battles?  Not really.  Fun though that would be this is a political game pure and simple.  The “winner” will be the side who at that moment has the most power not necessarily who has the best ideas.  It was ever thus.

The more interesting debate, and this has just really begun, concerns whether and to what extent wealth as opposed to income should be taxed.  That is where the debate is going.  I will come back to this issue after the UK Budget.

One final point on the so called “Mansion tax”.  I do find the lack of commentary on the fact that local taxation is devolved to the Scottish Parliament amusing.  Can you imagine the Scottish Parliament’s reaction to the UK Government interfering with one of the few tax powers it has?  Let’s call that a rhetorical question.  We do know how the UK Government reacts if the Scottish Parliament or the Scottish Government dares to do something that touches on a reserved matter.  Here are a few examples: free personal and nursing care, local income tax and minimum pricing for alcohol.

As with last week’s blog I will end with the French presidential election and news that Francois Hollande, the Socialist candidate, has announced plans to raise the top rate of income tax to 75 per cent on “indecent” annual incomes above €1 million. The use of the word “indecent” says it all.

Good luck to all our teams in action in Ireland this weekend.

Outer House case considering a claim for damages under the Occupiers Liability (Scotland) Act 1960. Mr Dawson worked as a self employed courier and was delivering a package to Ms Page’s cottage. Building works were taking place at the cottage and the surroundings resembled a building site.  After making two unsuccessful visits to the cottage to deliver the package, Mr Dawson left the package under an oil storage tank in the back garden. As he was leaving the cottage he slipped on a wet plank over a trench in the garden and injured his hand.

Mr Dawson’s claim for damages failed because the wet plank did not constitute a danger, and, even if it did, there was no requirement on Ms Page to exclude people from the site or give warning of the risks.

Lord Glennie observed:

“Wet planks may be slippery. A notice is not required to point that out. Such dangers, if they be dangers, send out their own warning. The pursuer observed that the plank looked slippery. What more would a notice have told him? Accordingly, I reject the submission that the defender was required, in the exercise of any duty under the Act to take reasonable care, to exclude people from the site or to put up a notice warning of whatever danger was posed by the plank walkway.”

The full decision is available from Scottish Courts here.

(See appeal to Inner House here)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

I think I will start with VAT and the proposed new Scottish national police force.

It was reported this week that the proposed new Scottish police force may face an annual VAT bill of £22 million.  Under the current structure police forces are treated like local authorities and are exempt from VAT.  However if they merge they may be subject to VAT.  The Scottish Government is currently in talks with HM Treasury to eliminate or minimise this potential financial liability.

I suspect that the Northern Ireland police force will be mentioned during these talks and in particular the fact that it has VAT exempt status.   So what is the problem you might ask.  The same exempt status will surely apply to the new Scottish police force.

The “just because it happens in Northern Ireland” argument does not always work with HMRC and HM Treasury.  Northern Ireland already has borrowing  and welfare powers.  Anyone involved in the Scotland Bill deliberations knows how hard HMRC and HM Treasury resisted calls for borrowing powers to be included.  They succeeded in ensuring that only restricted powers were included.  Welfare powers were not even seriously considered.  Northern Ireland is also to get partial control over air passenger duty and also possibly corporation tax.

In addition it seems that HMRC and HM Treasury cannot help but react negatively to any policy proposed by the Scottish Parliament that deviates from or impinges on reserved matters.  Examples include free personal and nursing care, local income tax, the Scottish Futures Trust and minimum alcohol pricing.  A report from the BBC news website on this issue can be found here.

Now to a surprise cut in council tax.  Stirling Council has become the only local authority in Scotland to reduce its council tax after councillors passed a budget on their second attempt.  The 1% cut, effective from 1 April, will see Band D council tax go down £12 from £1,209 to £1,197 a year.  Labour and Conservative councillors voted the measure through in an “alternative” budget after rejecting the minority SNP administration’s proposals.  More on this can be found on a BBC news website report which can be found here.

An article from the Evening News reports that The City of Edinburgh Council wants to investigate the idea of creating a “business improvement district” for Edinburgh’s tourism industry.  This would involve businesses making contributions to promote the city.  The article from the Evening News can be found here.  This is the latest in a series of revenue raising ideas from Edinburgh Council and of which I have written about previously.  See for example my blog of 9 December 2011.

Now to the fiscal powers debate and the latest group to enter the fray.  “Devo Plus” is a creation of the think tank Reform Scotland.  I should declare an interest as a former trustee of Reform Scotland and one of the authors of Reform Scotland’s “Devolution plus” fiscal powers paper.  I am though not involved in this campaign.  The position taken by the Devo Plus group is that they are opposed to “devo max” and independence and do not think the Scotland Bill goes far enough.  Instead they argue that the Scottish Parliament should be able to raise an amount roughly equal to what it is responsible for spending.  VAT and national insurance would remain in the hands of HM Treasury to ensure that Westminster was also accountable for its spending in Scotland.  It will be interesting to see what impact this campaign has in the coming weeks.  More on Devo Plus can be found here.

Now to the debate over the top rate of income tax.  Those arguing for the abolition of the top rate of income tax will be analysing preliminary UK Government statistics which suggest that the 50 per cent top rate of income tax has not raised any extra revenue.  A press release from Grant Thornton on this can be found here.

The “fuel duty discount pilot scheme for remote island communities” comes into operation today.  I was not surprised to see a report on the BBC news website of how HM Treasury had warned oil suppliers against attempting to profiteer from this scheme.  The report also notes that over the past week rises in the cost of fuel supplied to Orkney, Shetland and the Western Isles have been greater than the proposed discount.  Petrol and diesel at island pumps can be 20p more expensive than mainland prices.  I also read this week that the UK has the highest fuel tax burden in Europe with 60 per cent of the cost of unleaded petrol and 58 per cent of diesel made up of fuel duty and VAT.  I will resist the urge to make an ironic comment about North Sea oil.  The BBC news website report can be found here.

The BBC has reported that Barclays Bank has been ordered by HM Treasury to pay half a billion pounds in tax which it had tried to avoid.  Barclays was accused by HMRC of designing and using two schemes that were intended to avoid substantial amounts of tax.  The schemes, described as “highly abusive”, enabled the bank in question to avoid paying corporation tax on the profits it made from buying back its own debts, and to reclaim tax credits from HMRC on certain investment funds. The BBC website news report can be found here.

Now to a good idea.  A new “Assurance Commissioner” is to be appointed by HMRC following criticism from the House of Commons Public Accounts Select Committee about the relationship between HMRC and big businesses.  The following is from an article in the Telegraph and nicely sums up this matter: “In a move that amounts to a humbling mea culpa, HMRC is set to admit it needs to improve “transparency, scrutiny and accountability” after being publicly lambasted by the Parliamentary Public Acounts Committee over deals with Goldman Sachs and Vodafone.”  The article from the Telegraph can be found here.

I think I will end with France.  I will resist the urge to talk about last weekend’s game and instead mention a report by Reuters.  According to Reuters there has been a sudden rise in the number of French residents asking their wealth advisers about tax exile. They fear that the socialist party’s candidate Francois Hollande may win the forthcoming presidential election and increase wealth taxes.  I have heard similar claims many times before.  I have often wondered how many people actually leave.  I suspect not that many and, of those who leave, many regret doing so.

Have a good weekend.

Hanson v HMRC [2012] UKFTT 95 (TC) 

The First-tier Tax Tribunal has held that when determining whether a farmhouse qualifies for agricultural property relief (APR) from inheritance tax, the farmhouse and the land to which it is of a “character appropriate” must be in the same occupation, but need not be in the same ownership.

A reminder of where “character appropriate” comes from:

Agricultural property” is defined for APR purposes in section 115(2) of IHTA 1984 as meaning:

• Agricultural land or pasture.
• Woodlands occupied with (but ancillary to) agricultural land or pasture.
• Buildings used in connection with the intensive rearing of livestock or fish, provided the buildings are occupied with (but ancillary to) agricultural land or pasture.
• Farmhouses, cottages and farm buildings, and the land occupied with them (such as garden or grounds), that are of a character appropriate to the property described above.

Some background

Immediately before his death in December 2002 Joseph Charles Hanson was the life tenant of a trust created by his father in 1957.  The trust held a property that both parties in this matter agreed was a “farmhouse” for APR purposes and had an open market value in December 2002 of £450,000.

Mr Hanson’s son lived in the farmhouse which he had occupied since 1978 under a rent free licence. From there the son farmed 215 acres of land of which 128 acres was owned by the son and 25 acres was part owned by Mr Hanson.  The remainder of the 215 acres comprised 20 acres rented by the son from a third party and a further 42 acres whose ownership was unspecified.

The only land in common ownership and common occupation with the farmhouse was the 25 acres part owned by Mr Hanson and farmed by the son.

Following Mr Hanson’s death his executors claimed APR on the value of his interest in the farmhouse.  HMRC denied the relief on the basis that there was insufficient agricultural land in both common ownership and common occupation with the farmhouse for the farmhouse to pass the “character appropriate” test.

The son appealed the decision in his capacity as sole trustee of the trust arguing that common occupation was the only connecting factor required between the farmhouse and the agricultural land to which it was of a character appropriate.  The Tribunal agreed with the son.

This decision may be of significance in situations where a downsizing farmer has moved out of the farmhouse and gives away much of the agricultural land.

This decision is likely to be appealed by HMRC.

The full judgment is available here.

I think I will start with the fiscal powers debate.

There have been two more important contributions during the last week.  Both the Prime Minister and the former UK Chancellor, Alistair Darling, have said that devolving further tax and fiscal powers should be considered if Scotland votes “no” in 2014.  These announcements are only the latest in a series of high profile statements on this issue. In fact the Scottish electorate is in danger of being crushed in the stampede of former opponents of serious fiscal autonomy announcing their very own Damascus type conversion.

What though of the friendless Scotland Bill?  There is an obvious opportunity here for those who are against independence but in favour of greater tax and fiscal powers.  There is time to amend the Scotland Bill and to give a clearer idea of how much power they believe should be devolved.  That would also mean that the PM would have to give us some idea of which additional powers should be devolved rather than simply refusing to answer the question as he did this week.  There could even be a clause in the Bill saying that the provisions do not come into force until after the referendum.

If this is not done, and there is a no vote in the referendum, we will have years of further debate on this issue.

Now to HMRC’s latest targeted tax avoidance campaign.  The contrast to how HMRC and HM Treasury, albeit with Ministerial approval, have helped dozens of high earners employed by the public sector reduce their tax bills, is a stark one.

As a former electrician, long story, I was interested to see that the top dogs in the world of tradesmen are next to be offered a partial tax amnesty by HMRC.  Those who accept will be charged penalties of only 10 to 20% of the tax owed rather than the 100% maximum available penalty.  A similar campaign concerning plumbers has so far led to ten arrests and thousands of investigations.  I have resisted the urge to explain the main difference between an electrician and a joiner.  More on this offer can be found here.  Worth looking at even for an example of HMRC humour which is found in the title.

Let’s stick with HMRC.  HMRC is about to start issuing penalty notices for 850,000 late self assessment income tax returns.  HMRC have also reported that a record 90.4% of taxpayers filed on time this year.  I do though look forward to reading some of the fantastic excuses that people have used to explain why their return was not returned on time.

Now to the UK Budget which is less than a month away.  Lots of rumours regarding tax relief on pensions and what the Liberal Democrats are “demanding”.  I expect to see more “stories”, for stories read “briefing against my fellow Ministers”, on the cost of bringing forward the planned increase to the personal allowance.  I also expect to see more calls for a reduction in business taxes and simpler labour laws from sources in the Conservative party.  For “sources” read “Liam Fox”.

To put the tax cut debate into context the UK has borrowed £93.5bn so far this tax year.  That is down from £109.14bn in 2010/11.  Tax receipts are though likely to be back to pre-crash levels this year.   As is usually the way with statistics both sides can quote these figures to back up their arguments.

Now to a warning by the body who regulates solicitors in England & Wales.  Practitioners who help clients reduce their stamp duty land tax liabilities may be risking disciplinary sanctions. The Solicitors Regulation Authority is especially concerned about residential property schemes.  More on this can be found here.  I will be interested to see if the Law Society of Scotland decides to issue a similar warning.

I liked the following from a story in the Herald: “Gangster tax”.  Strathclyde Chief Constable Stephen House believes that police should be allowed to keep a share of the ever growing haul of underworld assets seized under the Proceeds of Crime legislation.  This legislation allows for the civil recovery and confiscation of money, goods and property earned through illegal means.  The Herald article can be found here although registration is required.

Now to Europe.  Europe’s Tax Commissioner Algirdas Semeta has given a speech assuring the City of London that it will benefit from a European Union financial transactions tax.  Good to see the Telegraph covering both sides of this debate.  I was particularly interested in one point made by Semeta.  Semeta challenges the claim that ordinary citizens and businesses would bear the brunt of the tax.  Semeta is quoted in the Telegraph article that day-to-day financial activities will not be included and that 85% of the transactions take place purely between financial institutions.  The article from the Telegraph can be found here.

Now to Japan.  A piece on the BBC news website reports that the Japanese cabinet has passed a plan to double sales taxes in an attempt to control the soaring costs of public debts.  The plan, which needs the approval of Japan’s parliament, will see taxes raised from the current 5 to 8% in April 2014 and then up to 10% by October 2015.  The reason for this is that Japan’s social security costs are expected to rise by 1tn yen (£8bn) a year as its population ages.  It estimates 40% of the population will be of retirement age by 2060.  The BBC news website article can be found here.

Lastly I was disappointed to find out that there is no longer a Stamp Office presence at Registers of Scotland.  It we cannot even join up these two bodies then it is clear there is no appetite amongst either the politicians or the civil servants, whether of a Scottish or UK ilk, to review and hopefully consolidate the numerous tax, law and registration services that currently exist in Scotland.  Given the relatively small size of our country and the likelihood of greater tax and fiscal powers being devolved then this is clearly a case of sticking one’s head in the sand.

Have a good weekend.

Sheriff Court case concerning the sale of Harwood Estate near Bonchester Bridge in Hawick. In 2002 the trustees sought to sell part of the estate with the exception of Harwood Mill, which was being retained as a residence for Andrew Lubbock, and the lodge, which was the subject of a liferent to Georgina Lauder.   However, no mention was made of the exception of the lodge in the narrative to the disposition and title to the lodge was included within the estate title registered in favour of the purchaser, Mr Feakins in the Land Register for Scotland.

When this was discovered some years later, the trustees sought declarator that the lodge had not been included in the subjects of sale and an order that the Land Register be rectified. The trustees argued that, as the scale of the plan attached to the disposition meant it was impossible to determine whether the lodge was part of the subjects of sale, regard should be had to the intention of the parties in determining the effect of the disposition.

Although no mention was made of the exceptions in the missives or disposition, the trustees had instructed their estate agents and solicitors that the estate was to be sold with the exceptions and the trustee’s solicitors had sent a fax to the purchaser’s solicitors indicating that the mill and lodge were not included in the sale (a fact that had not been brought to Mr Feakins attention, his solicitors believing it unnecessary as he had been content with the plan which represented the subjects being purchased). The draft sales particulars had also been drawn up in a manner which neither specifically included or excluded the mill and lodge (the estate agents having taken the view that specific mention may have deterred purchasers and was unnecessary as the buildings were not within the body of the estate).

Sheriff Daniel Kelly QC found that the Register was not inaccurate as the lodge had been transferred in the disposition. Even if the disposition had been ambiguous, the lodge was amongst the property transferred in the missives. The missives had been agreed to be final[1] and it was not open to have regard to the prior intention of the parties. Further, even if the parties’ intentions had been considered, their intensions were not ‘as one’ as Mr Feakins did intend to purchase the lodge.

Finally, even had there been an inaccuracy in the Register, it would not have been open to order rectification as Mr Feakins was ‘a proprietor in possession’[2] who would have been prejudiced by the rectification. Although Miss Lauder was in natural or direct possession of the lodge, neither she nor the trustees held a registered title. Mr Feakins held title to and possessed the estate as a whole (living on it with his family and having a sheep farm there too). Mr Feakins also understood that, following the sale, Miss Lauder’s liferent was with him as fiar and he allowed her to continue to occupy the lodge. Although the Sheriff found there was difficulty in construing Miss Lauder’s occupation of the lodge as being civil possession on behalf of Mr Feakins, he nevertheless tended towards the view that Mr Feakins might be construed as a proprietor of the whole estate including the lodge.

The full report is available from the Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

More information on the new contact details for the Edinburgh Stamp Office can be found here.

There is no longer a Stamp Office presence at the Registers of Scotland.