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

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

. 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"

. 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

. 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

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"

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

. Judge Sheridan

adopted the definition put forward by Lindley L.J. in the

English case of

Rolls

-v-

Miller

". . . 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

and that it would have to be

"habitually and systematically exercised"

In the case before him, he characterised the "business"

". .. 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".

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