Helena Housing Ltd v Revenue and Customs Commissioners

JurisdictionEngland & Wales
JudgeLord Justice Lloyd,Lady Justice Black,Lord Justice Lewison
Judgment Date09 May 2012
Neutral Citation[2012] EWCA Civ 569
Docket NumberCase No: A3/2011/1694
CourtCourt of Appeal (Civil Division)
Date09 May 2012

[2012] EWCA Civ 569.

Court of Appeal (Civil Division).

Lloyd, Black and Lewison L JJ.

Helena Partnerships Ltd (formerly Helena Housing Ltd)
and
Revenue and Customs Commissioners

Christopher McCall QC and Matthew Smith (instructed by McGrigors) for the appellant.

William Henderson (instructed by the Solicitor for HMRC) for the respondent.

Peter Crampin QC (instructed by the Treasury Solicitor) for the intervener.

The following cases were referred to in the judgment:

A-G v AspinallENR (1837) 2 My & Cr 613

A-G v De WintonELR [1906] 2 Ch 106

Attorney-General of the Cayman Islands v Wahr-HansenELR [2001] 1 AC 75

British Museum v WhiteENR (1826) 2 Sim & St 594

Compton, ReELR [1945] Ch 123

Estlin, Re (1903) 72 LJ Ch 687

General Nursing Council for England and Wales v St Marylebone Borough CouncilELR [1959] AC 540

Income Tax Special Commissioners v PemselELRTAX [1891] AC 531; (1891) 3 TC 53

Incorporated Council of Law Reporting v A-GELRUNKTAX [1972] Ch 73; [1971] 3 All ER 1029; 47 TC 321

IR Commrs v BaddeleyELRTAX [1955] AC 572; 35 TC 661

IR Commrs v City of Glasgow Police Athletic AssociationELRTAX [1953] AC 380; (1953) 34 TC 76

IR Commrs v McMullenELRTAXWLR [1981] AC 1; (1980) 54 TC 413 (HL); [1979] 1 WLR 130 (CA)

IR Commrs v Oldham Training and Enterprise CouncilTAX [1996] BTC 539

James, ReELR [1932] 2 Ch 25

Joseph Rowntree Memorial Trust Housing Association Ltd v A-GELR [1983] Ch 159

Kendall v GrangerENR (1842) 5 Beav 300

Morice v Bishop of Durham (1804) 9 Ves 399; (1805) 10 Ves 522

Oppenheim v Tobacco Securities Trust Co LtdELR [1951] AC 297

R (on the application of Al-Mehdawi) v Secretary of State for the Home DepartmentELR [1990] 1 AC 876

R (on the application of Independent Schools Council) v Charity Commission for England and WalesWLR [2011] UKUT 421 (TCC); [2012] 2 WLR 100

Sanders, ReELR [1954] Ch 265

Scottish Burial Reform and Cremation Society Ltd v Glasgow CorpELR [1968] AC 138

South Place Ethical Society, ReWLR [1980] 1 WLR 1565

Williams' Trustees v IR CommrsELRTAX [1947] AC 447; (1947) 27 TC 409

Corporation tax - Exemption - Charity - Registered social landlord - Objects to provide housing accommodation and other objects "for the benefit of the community" - Whether taxpayer's objects and purposes exclusively charitable - Entitlement to corporation tax exemption - Provision of accommodation not itself charitable - Benefit to individuals not merely incidental to community benefit - Taxpayer's appeal dismissed - Income and Corporation Taxes Act 1988, Income and Corporation Taxes Act 1988 section 505s. 505.

This was an appeal by the taxpayer, a registered social landlord, from a decision of the Upper Tribunal ([2011] UKUT 271 (TCC); [2011] BTC 1716) that it was not entitled to exemption from tax as a charity under the Income and Corporation Taxes Act 1988, s. 505.

The taxpayer company was a registered social landlord which had acquired part of the housing stock of St Helens Metropolitan Borough Council in Merseyside. The taxpayer was run on a not-for-profit basis with the principal activity of the letting, management and maintenance of rented housing. Its original memorandum and articles of association were replaced in October 2001 by new provisions which stated that the company's objects "shall be the business of providing: housing; accommodation; assistance to help house people; associated facilities and amenities; and any other object … for the benefit of the community". Subsequently the memorandum was further amended and the taxpayer was registered as a charity with effect from 1 December 2004. The taxpayer appealed against assessments to corporation tax for accounting periods in 2002 to 2004. The taxpayer argued that, as it was a charity from its inception, it was not liable for corporation tax at all.

The First-tier Tribunal (Tax) held, among other things, that the taxpayer's purposes were not exclusively charitable so that it was not entitled to the corporation tax exemption for charities under ICTA 1988, s. 505 ([2010] UKFTT 71 (TC); [2010] TC 00384). The taxpayer appealed to the Upper Tribunal. The issue was whether the taxpayer's purposes fell within the fourth head of Lord Macnaghten's classification of charitable purposes in Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531; 3 TC 53, namely "trusts for other purposes beneficial to the community". The Upper Tribunal dismissed the taxpayer's appeal, holding that, because of the scope in the present case for the provision of private benefit which was not simply ancillary to a charitable objective, the taxpayer's objects were not exclusively charitable ([2011] UKUT 271 (TCC); [2011] BTC 1716). The taxpayer appealed arguing that it was established for charitable purposes only, so that it was entitled to exemption from corporation tax in the relevant periods.

Held, dismissing the appeal:

1.In order to be charitable, it was not sufficient to assert, or even for the relevant constituent document to stipulate, that the activities or operations of the body in question were to be undertaken for the benefit of the community. More was required. The purpose had to be of the right kind, falling within the spirit and intendment of the preamble to the Statute of Charitable Uses 1601, directly or by analogy. In addition, any benefit afforded to individuals by the body from carrying out its purposes had to be subsidiary to the benefit to the public. (Pemsel, Williams Trustees v IR Commrs(1947) 27 TC 409, Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corp [1968] AC 138 and Incorporated Council of Law Reporting for England and Wales v Attorney-General [1972] Ch 73 considered.)

2.The fact that Parliament had provided for, or even prescribed, something to be done which was, in a general sense, for the public benefit did not show that to undertake it was a charitable purpose. Some proper functions of government were within the scope of the preamble, as listed and by way of analogy to those listed, but others were not.

3.The pursuit of the taxpayer's objects had to be for the public benefit, and any element of benefit to individuals had to be subordinate to the benefit to the public. The use of words such as "for the benefit of the community" was not conclusive in excluding any non-subordinate individual benefit. Any given case in which the phrase was used had to be considered on its own facts and merits. If the individual benefits to be provided were too significant to be regarded as subordinate, or of a kind outside the spirit and intendment of the preamble, the use of a phrase of that kind could not override the conclusion to be drawn from the facts. (IR Commrs v City of Glasgow Police Athletic Association [1953] AC 380, IR Commrs v Oldham Training and Enterprise Council [1996] BTC 539 and R (on the application of Independent Schools Council) v Charity Commission [2011] UKUT 421 (TCC) considered.)

4.The taxpayer's object of carrying out the activities of a registered social landlord incorporated things that could be done under s. 2 of the Housing Act 1996. Those objects were not exclusively charitable. Even if those objects which permitted the application of resources of the taxpayer to matters not related to accommodation for tenants were to be limited in some more substantial way by the phrase "for the benefit of the community", it did not follow that those wider objects were within the spirit and intendment of the preamble. Alternatively, approaching the case without regard to the additional objects brought in by reference to s. 2, the taxpayer could not satisfy the requirements of charity. That was for two separate but related reasons. First, the provision of housing accommodation, otherwise than for those in some relevant charitable need, was not a purpose within the spirit and intendment of the preamble, either directly or by analogy with any other purpose which had been so recognised. Secondly, even accepting that there was an element of benefit to the community in the pursuit of the taxpayer's objects, there was also a substantial element of benefit to individuals, which could not be regarded as only subordinate to the achievement of the benefit to the community.

JUDGMENT

Lloyd LJ: Introduction

[1]Helena Partnerships Ltd ("Helena") is a registered social landlord. It was incorporated in January 2001, but in October 2001 it adopted a new memorandum of association and new articles. Its objects were then the business of providing housing, accommodation, assistance to help house people, and associated facilities and amenities, and any other object that can be carried out by a company registered as a social landlord with the Housing Corporation, for the benefit of the community. It was not to trade for profit. Later, in November 2004, it changed its memorandum and articles of association again. The issue on this appeal is whether, in the period from October 2001 to November 2004, Helena was established for charitable purposes only, so that its funds were applicable for those purposes.

[2]If the answer to that question is that it was not so established, then Helena is liable for £6 million of corporation tax on the rents that it received. I do not need to go into why or how that liability arose, though we were told that the arrangements which gave rise to it also enabled £18 million of VAT to be saved. If the answer is that it was so established, there could be another question, not debated on this appeal, as to whether Helena's funds were in fact applied for charitable purposes only.

[3]As a result of the change to the memorandum and articles of association in 2004 Helena became registered as a charity, but that has no bearing on the answer to the question before us.

[4]Helena appealed against assessments to tax made by HMRC, first to the First-tier Tribunal, raising not only the point now in issue (and the point about the application of its funds) but also the tax...

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