BAPTIST UNION of IRELAND (NORTHERN) CORPORATION, Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 17 January 1945 |
| Date | 17 January 1945 |
| Court | King's Bench Division |
NO. 1310-HIGH COURT OF JUSTICE, NORTHERN IRELAND (KING'S BENCH DIVISION)-
Income Tax - Exemption - Charitable purposes - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Section 37 (1) (b).
The Appellants were trustees of the Baptist Union of Ireland Annuity Fund, which was established by the Baptist Union of Ireland in 1902 with the object of providing annuities for its members and for their widows and orphans. The income of the Fund, which was administered by a committee of the Union, was derived partly from subscriptions of beneficiary members and partly from voluntary donations, and over the period 1902 to 1940, 80 per cent. of the income was from outside sources. Membership of the Fund was limited to pastors of churches within the Union, evangelists under the direction of the Union or the Irish Baptist Home Mission, and missionaries of the Irish Baptist Foreign Mission (both Missions being controlled and managed by the Union). Members paid entrance fees and annual subscriptions (or "single payments" in lieu thereof) varying in amount according to their age at entry, and they (or their wives and children) were entitled to minimum benefits by way of annuity based upon actuarial valuations by reference to the said amounts paid by them, or on their behalf, and to additional benefits up to a prescribed limit, conditionally on the funds obtained from free contributions, etc., being sufficient to meet such additional benefits. In fact voluntary contributions to the Fund were so considerable that the Fund was able substantially to increase the benefits payable to members (or their dependants) and to accumulate considerable reserves.
In 1920 a certain Mr. McCay gave a sum of £1,000 to pay the annual subscriptions and entrance fees of members of the Fund on their behalf, and by his will he left one-fourth of the annual income of his residuary estate on trust for a similar purpose, this testamentary gift taking effect on his death in 1939. The investments representing both these benefactions were transferred to the Appellants as trustees. The McCay gifts were considerably more than sufficient to pay in full the subscriptions and entrance fees of members under the original rules of the Fund, and, in order to give the members the benefit of the second gift, the Union, under powers of revision specifically reserved to it, decided in 1939 to revise the rules of the Fund and, in particular, to increase the amount of the members' subscriptions and the annuities payable. Under the revised rules the persons eligible for membership were (a) members of the Union who were pastors of churches within the Union; (b) evangelists under the direction and control of the Union; (c) male missionaries and unmarried lady missionaries of the Irish Baptist Foreign Mission directly sent out by the Union; (d) the secretary of the Union; and (e) full-time principals or tutors of the Irish Baptist College. The general scheme of the Fund, as revised, was that members paid certain annual subscriptions (ceasing when they became annuitants), normally a percentage of their annual stipend, in consideration of which they (or their widows and orphans) were to be entitled to certain specified annuities (normally £100 for members and £50 for widows), conditionally on there being sufficient monies to pay the same; otherwise each annuity was to be reduced proportionately to the monies in hand. Provided he had been in membership for three years, a member was entitled to an annuity on relinquishing office on
or after attaining 65 years of age, or on earlier permanent incapacity. The widow and children of a member were entitled to the benefits of the Fund immediately on the husband's death, irrespective of the length of his membershipThe Appellants, as trustees, claimed exemption from Income Tax under Section 37 (1) (b) of the Income Tax Act, 1918, in respect of the investment income of the Fund and of the McCay trusts for the years 1939-40 to 1942-43 inclusive, contending that both the Fund and the trusts were established for the charitable purpose of the advancement of religion and that the income was accordingly applicable for charitable purposes only. The claim was refused by the Commissioners of Inland Revenue, and the Special Commissioners, on application to them under Section 19 of the Finance Act, 1925, upheld the refusal.
Held, that both the Fund and the McCay trusts were established for charitable purposes only, and the investment income of both was applicable to charitable purposes only, and that they were accordingly entitled to the exemption sought.
Stated under the Finance Act, 1925, Section 19, and Income Tax Act, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice in Northern Ireland.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 23rd February, 1944, the said Commissioners heard (under Section 19 of the Finance Act, 1925) a claim by the Baptist Union of Ireland (Northern) Corporation, Ltd. (hereinafter called "the Appellants"), as trustees of the Baptist Union of Ireland Annuity Fund (hereinafter called "the Fund"), for exemption from Income Tax in respect of investment income of the Fund for the years 1939-40, 1940-41, 1941-42 and 1942-43, on the ground that the income of the Fund was applicable to charitable purposes only, and was therefore exempt from Income Tax under Section 37 of the Income Tax Act, 1918.
2. The Baptist Union of Ireland (hereinafter called "the Union") is a Union comprising Baptist churches in Ireland with their pastors, and "personal "members", being Baptists in fellowship with one of the churches of the Union.
The objects of the Union are:-
(2) To promote a closer fellowship among all the Baptist churches in Ireland.
(3) To afford opportunity for conference; for joint action in questions affecting the welfare of the churches, and the co-operation of the churches in the advancement of the Union's distinctive principles in Ireland.
(4) The promotion of measures for educating young men suitable for the work of the Ministry, and the recognition and maintenance of evangelists.
The constitution of the Union is set out at pages 2 to 7 of the "Handbook "containing the revised Rules and Constitution of all organisations under the "control of the Baptist Union of Ireland", a print whereof is annexed hereto, marked "A", and forms part of this Case(1).
3. In the year 1902 the Union set up an "Annuity Fund" for the benefit of ministerial members of the Union who were pastors of churches within the Union; evangelists under the direction and control of the Union or Irish Baptist Home Mission (a Mission controlled and managed by the Union), and missionaries in active service who were directly supported by the Irish Baptist Foreign Mission (also a Mission controlled and managed by the Union). The rules of this "Annuity Fund" of the Union are set out at pages 22 to 31 of the said handbook. The main provisions of these rules are set out hereunder.
(a) By rule 1 the Union undertook to administer a fund to be formed partly by voluntary donations and partly by subscriptions of beneficiary members, to be designated "The Baptist Union Annuity Fund for Retired "Ministers and Missionaries and Ministers' and Missionaries' Widows and "Orphans".
(b) By rule 2 the object of the Fund was to provide annuities for its members, and annuities for their widows and orphans.
(c) By rule 3 the Fund was to be administered by the committee of the Union, and by rule 4 either the Appellants, or another named corporation, were to be the trustees of the Fund. In point of fact the Appellants became the trustees.
(d) By rule 10 membership of the Fund was to be limited to the persons set out in paragraph 3 hereof above.
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(e) The general scheme of the Fund was that members were to pay certain sums, in consideration of which they (or their widows and orphans) were to be entitled to certain benefits, which it was hoped would be augmented out of voluntary donations from non-members. The payments to be made by members were divided into two classes, viz.:-
(2) payments in order to secure an annuity for the member, and
(3) payments in order to secure an annuity for his widow and orphans.
(f) The sums payable by a member in order to secure an annuity for himself are set out in rule 13, and in the schedule printed at page 30 of the said handbook (Tables I and II).
(g) Under Table I an annual subscription was payable by the member, varying (according to age at the date of entry to the Fund) from £1 9s. 0d. per annum in the case of a member under 25 years of age to £3 0s. 8d. in the case of a member under 40. In the case of all members of 40 and over the annual subscription was a fixed one of £3 3s. 0d. per annum, but, in addition thereto, entrance fees were payable, varying from £1 0s. 7d. in the case of a member of 40 to £81 15s. 0d. in the case of a member of 59.
(h) Under Table II there were prescribed (in lieu of entrance fees and annual subscriptions) single payments varying from £32 8s.6d. in the case of a member under 25 to £92 3s.4d. in the case of a member of 59.
(i) The sums payable by a member in order to secure an annuity for his widow and orphans are set out in rule 16 and Tables III and IV of the said schedule.
(j) Under Table III an annual subscription was payable by the member, varying (according to age at the date of entry) from £2 12s.7d. per annum in the case of a member under 25 to £3 2s. 1d. per annum in the case of a member under 33. In the case of all members of 34 and upwards the annual subscription was fixed at £3 3s. 0d. per annum, but, in addition thereto, entrance fees were payable varying from 7s.4d. in the case of a member under 34 to £38 7s.0d. in the case of a member of...
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