Helena Housing Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 April 2011 |
| Neutral Citation | [2011] UKUT 271 (TCC) |
| Date | 06 April 2011 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2011] UKUT 271 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Warren J (President), Judge Alison McKenna.
Christopher McCall QC and Matthew Smith (instructed by McGrigors) for the taxpayer.
William Henderson (instructed by the Solicitor to HM Revenue and Customs) for the Crown.
The following cases were referred to in the judgment:
Attorney-General of Belize v Belize Telecom Ltd UNKWLR[2009] UKPC 10; [2009] 1 WLR 1988
Attorney-General of the Cayman Islands v Wahr-Hansen ELR[2001] 1 AC 75
Bank of Credit and Commerce International SA v Ali ELR[2002] 1 AC 251
Farley v Westminster Bank ELR[1939] AC 430
Income Tax Special Purpose Commissioners v Pemsel ELR[1891] AC 531
Incorporated Council of Law Reporting for England and Wales v Attorney-General ELRELR[1972] Ch 73 (CA); [1971] Ch 626
IR Commrs v City of Gasgow Police Athletic Association ELRTAX[1953] AC 380; 34 TC 76
IR Commrs v Oldham Training and Enterprise Council TAX[1996] BTC 539
Investors Compensation Scheme Ltd v West Bromwich Building Society WLR[1998] 1 WLR 896
James, Re ELR[1932] 2 Ch 25
Joseph Rowntree Memorial Housing Association v Attorney-General ELR[1983] Ch 159
Kendall v Granger ENRENR(1842) 5 Beav 300; 49 ER 593
Macduff, Re ELR[1896] 2 Ch 451
Morice v Bishop of Durham ENR(1805) 10 Ves 522; 32 ER 947
Sanders Will Trusts, Re ELR[1954] Ch 265
Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corp ELR[1968] AC 138
South Place Ethical Society, Re WLR[1980] 1 WLR 1565
Williams' Trustees v IR Commrs ELRTAX[1947] AC 447; 27 TC 409
Corporation tax - Relief - Charity - Registered social landlord - Objects "for the benefit of the community" - Whether taxpayer's objects and purposes exclusively charitable - 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, against a decision of the First-tier Tribunal ([2010] UKFTT 71 (TC); [2010] TC 00384) that it was not entitled to relief as a charity under the Income and Corporation Taxes Act 1988, s. 505.
The taxpayer company was a registered social landlord which had acquired the housing stock of St Helens Metropolitan Borough Council in Merseyside. The taxpayer was run on a not-for-profit basis with its principal activity being 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 the accounting periods 1 July 2002 to 31 March 2003, and 1 April 2003 to 31 March 2004. The taxpayer argued that it was a charity from its inception, so that 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. The issue, applying the law of charities as it stood prior to the commencement of the Charities Act 2006, was whether the taxpayer's purposes, properly construed, fell within the fourth head of Lord Macnaghten's well-known classification of charitable purposes in Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531, namely "trusts for other purposes beneficial to the community".
Held, dismissing the appeal:
1.When construing the memorandum and articles of association of a company, the motives and intentions of its founders were irrelevant. It was not generally relevant to consider evidence about the activities of a company in construing its memorandum and articles of association. However, where there was doubt or ambiguity about whether the objects of an institution were charitable, the court might examine the activities of the institution for the purpose of assessing whether the implementation of the objects would achieve a charitable end result. In order to determine whether an object, the scope of which had been ascertained by due processes of construction, was a charitable purpose it might be necessary to have regard to evidence to discover the consequences of pursuing that object. (Incorporated Council of Law Reporting for England and Wales v Attorney-General [1972] Ch 73 considered.)
2.In the present case, the principal activity of the taxpayer was the acquisition of the housing stock from the council, refurbishing it and letting it to tenants. That was not to say that such principal activity was a main object. Each object was independent and none was ancillary to another. The taxpayer could, if it chose to do so, pursue any of the other permissible objects or purposes without reference to its current activities as long as it was for the benefit of the community and it was not trading for profit. Accordingly, the FTT's conclusion was wrong as a matter of law if it was to be read as saying that the overall purpose, namely the management and provision of housing to tenants for the benefit of the council, was a purpose by reference to which all of the taxpayer's activities had to be assessed. (Incorporated Council of Law Reporting and Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531 considered.)
3.Benefit to the community or a section of it was a necessary, but not a sufficient condition for a purpose to be charitable. The objects of the body in question had to be examined and the objects had to be for the benefit of the community and within the spirit of the preamble to the Statute of Elizabeth. An object could be beneficial to thecommunity but not charitable. (Williams' Trustees v IR Commrs [1947] AC 447 and IR Commrs v Glasgow Police Athletic Association [1953] AC 380 applied.)
4.There was in the present case a dual benefit; the provision of housing to tenants was the medium through which the taxpayer sought to benefit the community. The fact that what was an essentially private benefit, which might be divorced from any need, could be conferred indicated that the benefit to the community referred to in the new memorandum and articles was not necessarily a benefit conferred pursuant to a charitable object. 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 was not itself formed for exclusively charitable objects.
1.This is an appeal from the decision of the Tax Chamber of the First-tier Tribunal (Judge Michael Tildesley OBE - "the Judge") released on 1 February 2010 ("the Decision"; [2010] UKFTT 71 (TC); [2010] TC 00384). Permission to appeal was given on 12 April 2010 by the Judge. We will refer to the Appellant as "HHL" and to the Respondents as "HMRC". HHL is a company limited by guarantee and not having a share capital.
2.We have been provided with an agreed statement of facts. It provides a useful summary. We also have the facts as found by the Judge which add some flesh to the somewhat skeletal summary. As an introduction, we take the following from the parties' agreed statement of facts:
(a) HHL was incorporated on 16 January 2001 under the name Housing St Helens Limited. Following a change of name, it is now called Helena Housing Limited.
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(b) The original Memorandum and Articles of Association of HHL were replaced in October 2001 by new provisions ("the New M&A"). The objects clause of the New M&A stated as follows:
4.The Company's objects shall be the business of providing:
4.1housing;
4.2accommodation;
4.3assistance to help house people;
4.4associated facilities and amenities; and
4.5any 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.
The Company shall not trade for profit.
(c) On 31 October 2001, 12 new directors of HHL company were appointed, the existing directors retired and a number of new persons, including appointees of St Helens Metropolitan Borough Council ("the Council"), were admitted as members and/or directors of HHL.
(d) HHL has been registered as a registered social landlord ("RSL") with the Housing Corporation at all times since 1 July 2002.
(e) In 1988 the Government established the "Large Scale Voluntary Transfer Programme" ("LSVT") under which housing stock can be transferred from local authorities to RSLs. The Council transferred some of its housing stock (the "Housing Stock") toHHL under the LSVT in July 2002.
(f) Since acquiring the Housing Stock from the Council in July 2002, HHL has undertaken a significant programme of repairs and refurbishment pursuant to the terms of the agreement under which the Housing Stock was acquired.
(g) By an agreement in writing dated 30 June 2002 referred to as the Development Works Agreement ("the DWA") between HHL and the Council, in consideration of the payment to HHL of £104 million plus VAT (payable in accordance with clause 4) HHL undertook to carry out, or to procure the carrying out, of the Qualifying Works set out in the schedule to the DWA.
(h) By an agreement in writing dated 1 July 2002 ("the Transfer Agreement") between HHL and the Council, HHL agreed to purchase certain property (including the Housing Stock) owned by the Council.
(i) The Transfer Agreement stated that the price to be paid was £133,058,361.
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(i) It was stated in clause 1.1 that this comprised:
(i) £28,888,361...
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