No hard and fast definition of ‘investment’ has been
made by the courts, although the decision in the case of IRC -v-
Broadway Car Co (Wimbledon) Ltd
[1946] 2 All E R 609 sheds some light:
“...the word “investment” was not a term of
art, but had to be interpreted according to its popular
conception.”
“The expression is, therefore, not limited to
investments which you would buy on the advice of a stockbroker -
Stock Exchange investments.... I think...the question whether
a particular source of income was an investment or not must be
decided as it would be by business men according to ordinary common
sense principles.”
The parties may seek to infer that the wording “holding
investments” connotes passive ownership and argue that
extensive personal involvement by the deceased/transferor in the
business cannot be classed as “holding investments”.
The Revenue contested this view in the case of Moore (
IHTM25275) deceased and our argument
that a business of holding investments can exist whether the
landlord was actively involved or essentially passive was upheld by
the Special Commissioners.
In the Income Tax case Griffiths -v- Jackson 56 TC 583,
Vinelott J observed (at page 593):
“The business may, as in this case, occupy much of the
taxpayer’s free time or even be one which required his whole
time and attention. The taxpayer may put as much work or more work
into his business as, for instance, someone whose business consists
in arranging licences to fix vending machines on the property of
others and who daily or at less frequent intervals collects the
proceeds and replenishes the machines. It is not too easy to see
why in the modern world a business consisting of the exploitation
of the right of property in land should be treated differently from
a business consisting of the exploitation of other assets. However,
the principle is now too deeply embedded in the law to be altered
except by legislation.”
To what extent these businesses are ‘mainly holding
investments’ for the purposes of IHTA84/S105 (3) depends very
much on the substance of the business itself and the services which
are provided, for separate consideration, over and above the mere
right for others to use the property in return for rent.
