ICI Plc v Colmer (Inspector of Taxes) (No 2)
| Jurisdiction | UK Non-devolved |
| Judge | LORD NICHOLLS OF BIRKENHEAD,LORD KEITH OF KINKEL,LORD MUSTILL,LORD NOLAN |
| Judgment Date | 18 November 1999 |
| Judgment citation (vLex) | [1999] UKHL J1118-3 |
| Date | 18 November 1999 |
| Court | House of Lords |
[1999] UKHL J1118-3
Lord Nicholls of Birkenhead
Lord Keith of Kinkel
Lord Mustill
Lord Nolan
HOUSE OF LORDS
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Nolan. For the reasons he gives I too would allow this appeal.
My Lords,
For the reasons contained in the speech to be delivered by my noble and learned friend Lord Nolan, which I have read in draft and with which I agree, I too would allow this appeal.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Nolan. For the reasons he gives I too would allow this appeal.
My Lords,
The facts of this matter are fully set out in the speech which I made in your Lordships' House on 14 March 1996, when the case was first considered. It concerns a claim by the respondents for consortium tax relief. The crucial question was (and is) whether Coopers Animal Health (Holdings) Ltd. ("Holdings"), a company in which the respondent taxpayer holds 49 per cent of the shares, was during the relevant period a holding company as defined by section 258(5)(b) of the Income and Corporation Taxes Act 1970. The definition, so far as material, reads as follows: (now section 413(3)(b) of the Income and Corporation Taxes Act 1998).
"'.. holding company' means a company the business of which consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries, and which are trading companies,"
and the opening words of section 258(7) provide that (see now section 413(5) of the Act of 1998)
"References in this and the following sections of this Chapter to a company apply only to bodies corporate resident in the United Kingdom …"
Your Lordships held that the opening words of section 258(7) applied to the words "company" and "companies" in section 258(5)(b) with the result that Holdings could only qualify as a "holding company" if its business consisted wholly or mainly in the holding of shares or securities of companies which were not only trading companies but also resident in the United Kingdom. This had been the view of the Special Commissioner, Mr. D. C. Potter Q.C., but the contrary view had been taken by Millett J. (as he then was) and by the Court of Appeal. The significance of the point lay in the fact that Holdings has 23 wholly owned trading subsidiaries of which 19 are resident outside the United Kingdom.
It was accepted by the parties and by your Lordships that for the purposes of the present case - though not as a universal proposition - the "wholly or mainly" requirement should be judged on the basis of a simple head count of the subsidiaries, so that if all or a majority of the subsidiaries satisfied the United Kingdom residence condition Holdings would qualify, but otherwise not. On this basis, of course, Holdings clearly failed to qualify.
In your Lordships' House the respondents raised for the first time the further argument that the construction of section 258 adopted by your Lordships was in conflict with European Community law, since in so far as it discriminated against companies holding shares in subsidiaries resident in other member states it militated against the rights of establishment conferred by articles 52 and 58 of the European Community Treaty (now articles 43 and 48 of the Treaty as amended by the Treaty of Amsterdam). In consequence, argued the respondents, your Lordships were obliged by article 5 (now article 10) to construe section 258 in a manner which avoided the conflict, or, in other words, to uphold the construction adopted by Millett J. and the Court of Appeal. In fact only six of the subsidiaries of Holdings are resident in other member states, which leaves a majority resident not merely outside the United Kingdom but outside the European Union and therefore unaffected by the Treaty: but the respondents contended that the Treaty point must nonetheless be addressed in order to determine the scope and validity of section 258(5)(b).
Accepting this last contention, and unable to regard the matter as acte clair, your Lordships referred the questions raised by the respondents' arguments to the Court of Justice on 24 July 1996. By its decision given on 16 July 1998 the Court of Justice upheld the first argument of the respondents. In paragraph 30 of its judgment the Court of Justice declared that:
"article 52 of the Treaty precludes legislation of a member state which, in the case of companies established in that state belonging to a consortium through which they control a holding company, by means of which they exercise their right to freedom of establishment in order to set up subsidiaries in other member states, makes a particular form of tax relief subject to the requirement that the holding company's...
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