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Denning & ors (applicants/respondents) v Her Majesty’s Revenue & Customs (respondent/appellant)

Thursday 16 June 2022

HMRC appeals the Upper Tribunal decision dated 8 April 2021 by which it was held that the value of the leasehold interests in both Manor Place and Maple House are nil.

The taxpayer is Zyrieda Denning. This was a dispute on an appeal to the First-tier Tribunal (Tax Chamber) about the market values of both the freehold and leasehold interests in two care homes in Aldershot known as Maple House Nursing Home and Manor Place Nursing Home. Dr Denning owns the care homes. She argued that the value of the leasehold interest is restricted to the value of the right to occupy the property at the agreed rent, and that the figure which the valuers had agreed as the capital value of the leasehold interest relates solely to the value of the business goodwill. HMRC argued that the value of the leasehold interest comprises the value of the right to occupy the property at the agreed rent plus the agreed capital value, the latter reflecting the trading potential of a trade related property and not goodwill.

The UT found that he agreed market rent must fully reflect the trading potential available to the tenant under the terms of the 5-year lease which it was granted. It further found that, looking at the valuation of Manor Place and Maple House as fully equipped operational entities, their trading potential was not all attributed to and reflected in the value of the land. The UT determined that the leasehold interests in the two care homes was nil.

View hearing:

Part 1

Part 2