Conservative and Unionist Central Office v Burrell
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LAWTON,LORD JUSTICE BRIGHTMAN,LORD JUSTICE FOX |
| Judgment Date | 10 December 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J1210-4 |
| Docket Number | 81/0511 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 December 1981 |
[1981] EWCA Civ J1210-4
Lord Justice Lawton,
Lord Justice Brightman
and
Lord Justice Fox
81/0511
1979 No. 52
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (Civil Division)
On appeal from the Chancery Division
(Revenue Paper) (Mr. Justice Vinelott)
Royal Courts of Justice
Mr. JOHN KNOX, QC, and Mr. CHRISTOPHER McCALL (instructed by The Solicitor of Inland Revenue) appeared on behalf of the Respondent (Appellant in the Court of Appeal).
Mr. ANDREW PARK, QC, and Mr. DAVID GOLDBERG (instructed by Messrs, Trower Still & Keeling) appeared on behalf of the Appellant (Respondent in the Court of Appeal).
This is an appeal by the Inland Revenue from an order of Mr. Justice Vinelott made on April 2, 1980, whereby he adjudged on the hearing of an appeal by way of Case Stated from a decision of the Commissioners for the Special Purposes of the Income Tax Acts that such decision was erroneous and that assessments to corporation tax on the Conservative and Unionist Central Office for each of the five years ending on March 31, 1972 to 1976, be discharged. The Special Commissioners had decided that the Central Office was an unincorporated association and as such was chargeable to corporation tax on its profits under the provisions of sections 238 (1) and 526 (5) of the Income and Corporation Taxes Act 1970. Mr. Justice Vinelott adjudged that it was not such an association so that corporation tax was not chargeable. It was agreed before us that the Central Office was nothing more than an administrative unit of the Conservative and Unionist Party (to which I shall refer hereafter as "the Party"). No point has ever been taken by either side as to the name used for the purpose of the assessments. Both parties to this appeal asked the Court to consider the legal nature of the Party. If it is an unincorporated association, corporation tax has to be paid on the income identified in the Conservative and Unionist Party Income and Expenditure Accounts for the relevant years on "investment income and interest". If it is not such an association, income tax will have to be paid on this income. We have not been concerned to decide who will have to pay income tax but we were told by Mr. Park on behalf of the Party that whatever income tax is payable will be paid out of the Party's central funds. The reason why the Party is contesting the assessments to corporation tax which have been made upon it is that for the relevant years the rates at which corporation tax was charged were much higher than the rates for income tax.
The charging section of the Income and Corporation Taxes Act 1970 (section 238 (1)) starts with these words: "Corporation tax shall be charged on profits of companies….". Section 526 is an interpretation section. Sub-section (5) defines "company" as follows: "'Company' means, subject to subsection (6) below [which has no relevance in this case], any body corporate or unincorporated association, but does not include a partnership, a local authority or a local authority association". It is against this statutory background that a meaning has to be given to the words "unincorporated association". It is sufficiently like a "company" for it to be put in the charging section within the ambit of that word. The interpretation section makes it clear that the word "company" has a meaning extending beyond a body corporate but not as far as a partnership or a local authority. I infer that by "unincorporated association" in this context Parliament meant two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and upon what terms and which can be joined or left at will. The bond of union between the members of an unincorporated association has to be contractual. This was accepted by the Special Commissioners and was the basis of their conclusion. The point of law which arises is whether on the facts they found they could properly have come to the conclusion which they did. The facts are set out fully in the Case. For the purposes of this judgment I need do no more than refer to those which I consider to be relevant to the point of law.
Since membership of an unincorporated association is based on agreement between the members, a starting point for examining the legal nature of the Party is to consider how anyone can join it. To this there is a short answer: no one can join the Party directly. Membership can be obtained either through a local constituency association or through the Parliamentary party. Members of local constituency associations, and such associations themselves, have no constitutional links with the Parliamentary party although there are many political links. These local associations choose their own Parliamentary candidates from a list of candidates approved by the Party's Standing Advisory Committee. If a candidate of their choice is elected a member of the House of Commons he becomes a member of the Parliamentary party when he accepts the Conservative Whip, which he will do on election but which he may refuse later, in which event he will no longer be a member of the Parliamentary party. Once elected members of the House of Commons become representatives of the constituency for which they have been elected, not delegates of the local constituency associations which may have put them up as candidates. On the facts as found I can find nothing which links contractually and directly members of local constituency associations to Conservative members of the House of Commons representing their constituencies. The lack of a contractual link is even more clear in the case of peers who are members of the Parliamentary party as long as they accept the Conservative Whip in the House of Lords.
Mr. Knox on behalf of the Inland Revenue did not suggest that there was any direct link. His submission was that all the different sections of the Party are linked together through the National Union and the Party Leader and that anyone joining a local constituency association (which is the only way in which a member of the public, not being a peer or a member of the House of Commons, can join the Party) by that act impliedly accepts the linkage so that he becomes a member of an unincorporated association which is the Party.
Anyone joining a local constituency association impliedly agrees to become linked to the National Union. Between 1972 and 1975 the members of that body were local constituency associations. In 1975 the Rules were changed so that anyone who subscribed annually to any registered constituency association became a member of the National Union. Mr. Park on behalf of the Party accepted that all who were members of the National Union were members of an unincorporated body. But that still leaves a constitutional gap between the National Union and the Parliamentary party. The Special Commissioners were of the opinion that the gap was bridged by the rules which regulate the Party Meeting and the selection of the Leader of the Party. Without such a bridge having its foundations in contractual relationships there could not be, in my judgment, an unincorporated association. Peers, particularly Scottish representative peers, and Conservative members of the House of Commons would have no bonds of union with local constituency members.
The keystone of the bridge is said to be the Party Leader. In a booklet, entitled "The Party Organisation", which was annexed to the Case, the Leader's position and functions are described as follows: "The Leader of the Party stands at the apex of the entire structure of the Party, linking together the three elements of Parliamentary Party, National Union, and Party Headquarters….. the Leader heads both the Conservative Party in Parliament and the Conservative Party Organisation in the country, including the Party Headquarters. He is elected in the first place by the Conservative Members of Parliament in the House of Commons…. The Leader elected by the Parliamentary Party in the House of Commons is then presented for election to a special meeting representing the Party as a whole. This meeting is organised by the National Union and the Chief Whip jointly. Conservative Members of both Houses, Parliamentary Candidates and Members of the National Union Executive Committee covering...
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