Elizabeth Ramsey Vs HMRC [2013] and clause 24

Elizabeth Ramsey Vs HMRC case has particular implications for property investors who hold residential property in their personal names. The case provides a way for investors to mitigate the tax implications of clause 24, by allowing them to transfer their property business into a limited company. Once they do this they can still claim interest relief on any debt taken out to purchase their properties.

Elizabeth Ramsey In the Ramsey case Judge Roger Berner overturned the decision of the First Tier Tribunal which did not allow s162 relief to the tax payer. s162 allows businesses conducted in personal names to be transferred to a limited company without the payment of capital gains tax, CGT, until the shares in the company are sold.

In making his decision to allow s162 relief to the tax payer Judge Berner reviewed a number of previous cases, in particular the case Customs and Excise Commissioners v Lord Fisher [1981] a VAT case, was of particular relevance and it gave rise to six criteria for determining whether an activity is a business.

  1. Whether the activity is a ‘serious undertaking earnestly pursued’, or ‘a serious occupation, not necessarily confined to commercial or profit-making undertakings’, both of them cited to and referred to by the tribunal in their decision;
  2. Whether the activity is an occupation or function actively pursued with reasonable or recognisable continuity
  3. Whether the activity has a certain measure of substance as measured by the quarterly or annual value of taxable supplies made
  4. Whether the activity was conducted in a regular manner and on sound and recognised business       principles
  5.  Whether the activity is predominantly concerned with the making of taxable supplies to consumers  for a consideration
  6. Whether the taxable supplies are of a kind which, subject to differences of detail, are commonly made by those who seek to profit by them


In Elizabeth Ramsey Vs HMRC  Judge Berner reviewed a number of cases and concluded:

“…Business is not aligned as a concept with trades or professions, and there is nothing in that respect to colour its meaning. Nor is any special exception created for cases where the business comprises wholly or mainly the holding of investments. What there is, on the other hand, is a requirement that a person who is not a company transfers a business as a going concern to a company. The logic, and perceived purpose, of s 162 is to defer a charge to capital gains tax when the only change that has taken place is the form in which the business is operated (from non-corporate to corporate), and to the extent that the consideration consists of shares in the company. The legislation is looking at business in the context of something that is or may be carried on both by, for example, an individual and by a company. In my judgment the proper approach in that context is to construe “business” broadly, according to its unvarnished ordinary meaning.”

Essentially Judge Berner concluded that it would not be acceptable to deny s162 relief to an individual on the basis that property letting was not a business when the same activity would be considered a business when run via a limited company.

The other major point in Judge Berner’s decision was that the tax payer in the Ramsey case spent at least 20 hours per week on their business for it to be regarded as a business. Importantly Judge Berner did not ask for Ms Ramsey to provide any evidence of spending 20 hours in her business, therefore the number of properties also did not matter.

If you chose to use the Elizabeth Ramsey case to use the s162 relief then it is possible for HMRC to ask for evidence of 20 hours per week, and it may be difficult for you if you are already in full time employment. If you can show that you are also actively looking to purchase additional properties, showing the time you spend on travelling and viewing properties this will help you.

You may also find the following HMRC link useful in helping you create a business for your property portfolio Government link for property

The following link takes you to the detail of the Elizabeth Ramsey Vs HMRC [2013] case.

HMRC tribunal documents

Posted in Property
One comment on “Elizabeth Ramsey Vs HMRC [2013] and clause 24
  1. ranjan bhattacharya says:

    Hi Aadil, I was of the understanding that Ramsey has been superseded by new EU rules on buy-to-let mortgages and accidental landlords. ie if you are an accidental landlord (ie originally bought the property to live in and subsequently rented it out), then you will be subject to similar mortgage eligibility criteria to owner/occupiers. However, if you took a BTL loan out and put a tenant in from day one, then you are deemed as running a property business and will not be subject to consumer lending criteria. nIf you are deemed as running a property business by Eu directive, then that’s what you are doing and that supersedes Ramsay (I was told this by a tax barrister). Don’t know if you would care to comment or clarify?

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