Conservative and Unionist Central Office v Burrell
| Jurisdiction | England & Wales |
| Date | 1980 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Corporation tax-Investment income-Unincorporated association- Whether investment income of central office of a political party liable to corporation tax.
The party treasurer of the Conservative and Unionist Party held certain funds for the purposes of the party's Central Office. Until they were needed these funds were invested and produced an investment income. The Central Office was an organ of the party which provided central services to it and employed a permanent staff. Its funds derived partly from direct donations and legacies and party from quota contributions by Conservative and Unionist constituency associations, which, however, those constituency associations could not be compelled to make. The Central Office was distinct both from the National Union (a federation of constituency associations) and from the parliamentary party, and was not under the control of either. It was under the direct control of the party chairman, who in turn was appointed and could be dismissed at will by the party leader. The rules for the selection of the party leader provided that he or she should be chosen by a series of ballots of the members of the House of Commons taking the Conservative whip, and that "the candidate thus elected will be presented for election to the Party Meeting". Those entitled to attend the party meeting were the parliamentary party, adopted parliamentary candidates and members of the executive committee of the National Union.
Corporation tax assessments were made on the Central Office on the footing that the investment income belonged to an unincorporated association (see the definition of "company" in Income and Corporation Taxes Act 1970, s 526(5)). The Special Commissioners held that the Conservative Party was an unincorporated association whose membership consisted of the members of the constituency associations and the parliamentary party. They further held that this unincorporated association was assessable to corporation tax in respect of the investment income.
The Chancery Division, allowing the taxpayer's appeal held that the Special Commissioners' conclusion that the Conservative Party was an unincorporated association was not a possible conclusion upon the evidence before them. The Crown appealed.
Held, in the Court of Appeal, unanimously dismissing the Crown's appeal, that an "unincorporated association" in the context of the Corporation Taxes Acts means 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 is contractual; upon the facts there was no such contractual link binding together the members of local constituency parties and the Members of both Houses of Parliament who accept the Conservative Party Whip and the Special Commissioners were wrong to find one in the rules which regulate the Party Meeting and the selection of the Party Leader; the legal nature of a donation to Central Office central funds was one of mandate and the holding of such funds and their administration for the use and benefit of the Conservative Party did not have to rely for its legal framework upon the supposition that the Conservative Party is an unincorporated association.
Stated under the Taxes Management Act 1970 s 56 by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a hearing before the Commissioners for the Special Purposes of the Income Tax Acts on 17, 18, 19 and 20 July 1978 the Conservative and Unionist Central Office (hereinafter called "Central Office") appealed against assessments to corporation tax in the sum of £40,000 for each of the accounting periods ended on 31 March 1972 to 31 March 1976 inclusive.
2. The question which we had to decide is shortly stated in para 1(1) of our decision in 9 below.
3. The following witnesses gave evidence before us:-the Rt. Hon. Eric Baron Chelmer and Mr. George Gavin Carlyle. Written statements by these witnesses were also submitted to us. These contained helpful summaries of the evidence in chief which the witnesses gave before us. In so far as they related to matters of fact we accepted them as accurate; in so far as they contained expressions of opinion or views on the question in issue before us, we regarded them as supplementing the submissions made by Mr. Park on behalf of Central Office. Lord Chelmer qualified his statement in one important particular. He corrected the statement that he had been a subscribing member of the Conservative Party for 40 years by saying that he had over a period of 40 years been a member of several constitutency associations. [In the course of his evidence Mr. Carlyle also made reference to a note on certain bank accounts which he had prepared.]
We have summarised in 9(2) below, our findings of fact based upon the evidence of Lord Chelmer and Mr. Carlyle, and on their written statements and the other documentary evidence which they made available to us, listed in 4 below. Copies of the witnesses' two statements and of the note on bank accounts are available for inspection by the Court if required.
4. The following documents were proved or admitted before us:
Document A
Conservative and Unionist Central Office annual report 1975-76.
A1 A specimen Central Office order form.
A2 A specimen Central Office contract of employment.
A3 A similar specimen contract relating to an executive appointment.
Document C
Conservative Board of Finance constitution and rules.
Document D1
D (i) Rules and standing orders of the National Union of Conservative and Unionist Associations, revised 1972.
D (ii) The same but as revised in 1975 and 1978.
Document E
Notes for constituency treasurers.
Document F
Conservative Central Office, organisation series, the party organisation.
Document G
Specimen rules, constitution and membership card of a constituency association.
Document H
Organisation summary dated 15 May 1973. Copies of the above are available for inspection by the Court if required. The appeal proceeded on the common basis that descriptive material in them could be accepted as accurate.
5. The relevant facts as found by us on the basis of the evidence submitted are set out in 9(2) below.
6. The contentions advanced by Mr. Park on behalf of Central Office are set out in 9(4) (i) to (iv) below.
7. The contentions advanced by Mr. Davenport on behalf of the Crown are set out in 9(4) (v) below.
8. In addition to the cases referred to in 9(3) below, the following cases and authority were cited in the course of argument:
Smith v. Anderson (1880) 15 Ch D 247; In re Astor's Settlement Trusts, Astor v. Schofield and Others[1952] Ch 534; Leahy v. Attorney-General for New South Wales and Others [1959] AC 457; Wood Preservation Ltd v. Prior 45 TC 112; [1969] 1 WLR 1077; In re Denley's Trust Deed, Holman and Others v. H.H. Martyn & Co. Ltd. and Others [1969] 1 Ch 373;Snell's Principles of Equity 27th Edn pp 99-100.
9. We, the Commissioners, who heard the appeal, took time to consider our decision and gave it in writing on 31 August 1978 as follows:-
1. The Issue
(1) This appeal relates to corporation tax assessments for each of the five years ending on 31 March 1972 to 1976 inclusive, made on the Conservative and Unionist Central Office, commonly and conveniently called "Central Office". No objection is raised to the name used for the purpose of the assessments. No point is taken that the taxpayer has not been correctly identified: the point taken is that there is no taxpayer to identify. Liability for corporation tax is imposed on companies by s 238(1), Income and Corporation Taxes Act 1970. "Company" is defined in s 526(5) of the Act as meaning any body corporate or unincorporated association. In the Income and Expenditure Account of the Central Funds of the Conservative and Unionist Party (Document A(1) ) for each of the relevant years, the income which it is sought to tax is identified as investment income and interest. Mr. Park, for the Appellant, argues that Central Office, whatever else it may be, is not a company within the relevant definition and that there is, as a matter of law, no unincorporated association in existence to which the Central Office funds belong so as to make that unincorporated association liable to corporation tax on the income. While disposed to accept that Central Office is not an unincorporated association, Mr. Davenport, for the Crown, argues that there is an unincorporated association, identifiable as the Conservative Party, on behalf of which, and subject to, the rules of which the Central Office funds are held. The issue in this appeal is whether or not such an unincorporated association exists. If it does not, no corporation tax is payable on the income and the assessments must be discharged. If, however, it does, the income must be accurately quantified and the adjusted assessments upheld.
(2) At this point, one general observation, may, perhaps, usefully be made. Obviously there is a sense in which the Party exists. Central Office is identified as the Party Headquarters. Those who work there, whether in a voluntary or professional capacity, acknowledge their allegiance to the Leader of the Party. The Chairman of the Party is responsible for making the policy of the Party known, the treasurers for the Party's finance. But those who use these expressions in their day to day work, or to describe the party organisation in Party literature, (Lord Chelmer, for example, the senior party treasurer in the relevant years, or Mr. Carlyle, a Central Office "professional" with the title of comptroller...
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