Glasgow Trades House v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 11 December 1969 |
| Date | 11 December 1969 |
| Docket Number | No. 8. |
| Court | Court of Session (Inner House - First Division) |
FIRST DIVISION.
RevenueIncome taxExemptionCharityBuilding of architectural and historic interestTrust fund established by owners primarily for maintenance of buildingIncome wholly applied to maintenanceBuilding used by owners for own purposes and for letting to third partiesBuilding on view to publicIncome Tax Act, 1952 (15 and 16 Geo. VI and 1 Eliz. II, cap. 10), sec. 447 (1) (b).
The Income Tax Act, 1952, enacts by sec. 447:"(1) Exemption shall be granted(b) from tax chargeableunder Schedule D in respect of any yearly interest or other annual payment, forming part of the income of any body of persons or trust established for charitable purposes onlyand so far as the same are applied to charitable purposes only."
The owners of a building of architectural and historic importance established a trust fund, the income from which was, under the leading trust purpose, to be applied in defraying annually the expenses incurred by them in maintaining the building. In practice the income was wholly applied for this purpose. The building was used by the owners for their own business and social activities and was let to third parties for similar activities. It was also on view to the general public.
Held that, while in view of the public importance of the building its maintenance was a charitable purpose, another purpose of the fund was to relieve the owners of the burden of maintaining the building for their own use, which was not a charitable purpose; that the latter purpose was not incidental to the former; that in these circumstances the fund was not established, nor was the interest applied, for charitable purposes only; and consequently that the income did not qualify for exemption from tax under sec. 447 (1) (b).
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at Edinburgh on 6th and 7th March 1968, the Trades House of Glasgow, as trustees of the Trades Hall Endowment Fund, appealed against the refusal of the Commissioners of Inland Revenue to allow exemption from tax, under section 447 (1) (b) of the Income Tax Act, 1952,1 in respect of the income of the fund for the year 196667. The questions for decision were (1) whether the fund was established for charitable purposes only; and (2) whether the income of the fund was applied to charitable purposes only. The Commissioners held that both questions should be answered in the negative, and refused the appeal. At the request of the Trades House they stated a case for the opinion of the Court of Session.
The case set forth that the following facts were admitted or proved:"(i) By the beginning of the seventeenth century various types of craftsmen in Glasgow had become incorporated into fourteen individual Craft Guilds, whose functions were primarily to safeguard the interests of their respective crafts and of the craftsmen and their families. A dispute between the craftsmen and merchants in Glasgow was resolved by reference to arbitration. The arbiter's findings are embodied in a decree known as the Letter of Guildry, under which a body known as the Trades House was formed. The members of the Trades House were the elected representatives of the fourteen original Craft Guilds. The relationship between the Craft Guilds and the Trades House was similar to that between individual states and a federal government. (ii) In 1794 a building known as the Trades Hall (hereinafter called the hall) was erected and paid for by funds provided by the Trades House and the fourteen Craft Guilds and is still owned by those bodies. The hall was designed as a meeting place for the Trades House and the fourteen Craft Guilds and has continued to be used for that purpose and for their social and business activities. The functions of the Craft Guilds are now the alleviation of hardship of members in distress and the relief of widows and dependants of former members, (iii) The hall is situated in the commercial centre of Glasgow. It contains an entrance hall, reception room and restaurant on the ground floor, a banqueting hall, saloon, reception room and library (dispense bar) on the first floor, and small office premises on the second floor. The restaurant is let out at a commercial rent and is available for the use of the public. The office premises are let at a small annual rent. The hall (not including the restaurant and office), when not used by the Trades House and the Craft Guilds, is available for letting to the general public. When so let, the hall is normally let to various societies
or organisations for meetings and other functions, such as concerts, dances and dinners. By reason of its historical and architectural interest it is an attractive venue for such functions and is widely so used. There is only limited accommodation for functions of this kind in Glasgow. The charges made for such use are on a commercial basis and approximately correspond with those made by hotels, restaurants, etc. Members of the public are allowed to enter and inspect the hall on application to a hall-keeper employed by the owners. Arrangements are also made for inspection by organised parties. (iv) At a meeting of the Trades House on 23rd February 1966 a motion in the following terms was approved: That the House accept the recommendation made by the Hall Buildings Committee at its meeting on 2nd February 1966 to set up formally a capital fund to endow the hall buildings, and accordingly resolve: (1) That a capital fund be established forthwith and that the same be known as "the Trades Hall Endowment Fund." (2) That a special account be opened with the Bank of Scotland, 110 St Vincent Street, Glasgow, into which all sums received and to be received for the fund be paid and that said account be operated upon by authority of any two of the Platform Committee of the House. (3) That the House donate to the fund 6400, being the total of amounts already received or expected to be received from the Crafts in payment of the share in the hall buildings acquired by them from the House. (4) That the capital of the Fund be invested from time to time in such investments and securities as the Finance Committee shall in its sole discretion approve, and that such investments and securities be taken in name of the said Bank's nominee company for behoof of the Trades Hall Endowment Fund. (5) That the income of the fund be applied: (Firstly) in meeting the expenses of operating and administering the funds; (Secondly) in defraying annually the expenses incurred by the House and the Crafts in maintaining the Trades Hall buildings, before charging the balance, if any, of such expenses to the proprietors in proportion to their shares; (Thirdly) in the event of there being any surplus income after meeting the foregoing purposes, in meeting the cost of any improvements or extraordinary expenditure on the Trades Hall buildings decided upon by the Hall Buildings Committee; and (Fourthly) in the event of there being any surplus income after meeting the foregoing purposes, in such charitable purposes as the House may from time to time resolve. (6) That if at any time in the future the expense of maintaining and improving the hall buildings ceases to be the liability of the House and the Crafts, as joint proprietors, or if at any time the House should decide that there is no longer any need of the Trades Hall Endowment Fund, the fund shall thereafter be held by the House in trust for such charitable purposes only as the House may from time to time resolve. The resolution was confirmed on 26th May 1966. The income of the fund had been applied in meeting the expenses of operating and administering the fund and in defraying annually the expenses incurred by the Trades House and the Craft Guilds in maintaining the hall before charging the balance of such expenses to the proprietors in accordance with their respective shares of ownership."The Special Commissioners then summarised the evidence, which they accepted and which is mentioned in the opinions of the judges, tending to show the architectural and historic importance of the hall. They also accepted evidence that the average annual deficit on the hall for the preceding seven years was about 3700; that this was likely to increase; and that it was most unlikely that the hall would ever be sold "because the proprietors (a) considered in view of its historical and architectural importance they were performing a useful public service in maintaining and preserving the hall, and (b)had regarded it as their home for a long period."
The contentions of the parties were stated as follows:
"It was contended on behalf of the appellants:(1) that for income tax purposes the test as to whether a body or fund was charitable was to be determined in accordance with English law: Inland Revenue v. Glasgow Police Athletic AssociationSC, 1953 S.C. (H.L.) 13, per Lord Normand at p. 21; (2) that to be charitable the fund must be established and maintained for purposes which were (a) beneficial to the community, and (b)within the spirit and intendment of the preamble to the Statute of Elizabeth as set out in section 13 of the Mortmain and Charitable Uses Act, 1888: Scottish Burial Reform and Cremation Society Limited v. Glasgow CorporationSC, 1967 S.C. (H.L.) 116, perLord Reid at p. 123 and Lord Upjohn at p. 125; (3) that the fund was established and maintained for purposes beneficial to the community in that the continuing maintenance and preservation of the hall produces public benefits deriving from the public inspection of the external and internal architectural merit of the building, the relationship and influence of the building on the surrounding area, the historical and social significance of the building and the importance of its accommodation to representative bodies in Glasgow; (4) that the benefits which were derived by the public from the building were not restricted by any private use made of it by...
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