Imperial Chemical Industries Plc v Colmer (Case C-264/96)
| Jurisdiction | England & Wales |
| Judgment Date | 05 December 1991 |
| Date | 05 December 1991 |
| Court | Chancery Division |
Chancery Division.
Millett J.
Peter Whiteman QC (instructed by Miss Zahreen Hussein, solicitor, ICI) for ICI.
Roger Ter Haar (instructed by the Solicitor of Inland Revenue) for the Crown.
Corporation tax - Consortium relief - Meaning of "holding company" - Relief claimed for losses of UK trading subsidiary of UK holding company owned as to 49 per cent by claimant - Holding company was 90 per cent owner of 23 companies, four of which resident in UK - Whether conditions for consortium relief satisfied - Income and Corporation Taxes Act 1970 section 258 subsec-or-para (2) section 258 subsec-or-para (5) section 258 subsec-or-para (7)Income and Corporation Taxes Act 1970, sec. 258(2), (5)(b), (7) (replaced by Income and Corporation Taxes Act 1988 section 402 subsec-or-para (3) section 413 subsec-or-para (3) section 413 subsec-or-para (5)sec. 402(3), 413(3)(b), (5) of the 1988 Act).
This was an appeal by ICI from the determination of a special commissioner that consortium relief was not available under theIncome and Corporation Taxes Act 1970 section 258 subsec-or-para (2)Income and Corporation Taxes Act 1970, sec. 258(2) in respect of the trading losses of a subsidiary trading company owned by a holding company which in turn was owned by ICI and another company, because a majority of the subsidiaries of the holding company were not UK resident companies.
A UK resident holding company ("CAHH") was incorporated in 1984. The issued share capital was owned as to 51 per cent by D Wellcome Foundation Ltd and as to 49 per cent by ICI who together formed a consortium. The only activity of CAHH was that of owning shares in subsidiary companies trading in many countries. Of those subsidiaries 19 were foreign companies and four were UK resident. The UK resident subsidiaries accounted for some one third of the aggregate turnover of the trades of all the subsidiaries of CAHH. One of the UK resident subsidiaries was CAH which incurred substantial trading losses in its accounting periods to 31 December 1984, 1985, 1986 and 1987.
The issue was whether ICI could claim group relief for the losses of the operating company, CAH, which in turn depended on whether CAHH was a "holding company" within the meaning of Income and Corporation Taxes Act 1970 section 258 subsec-or-para (5)sec. 258(5)(b) of the 1970 Act.
The Crown contended that the opening words of Income and Corporation Taxes Act 1970 section 258 subsec-or-para (7)subsec. (7), "References in [this section]…to a company apply only to bodies corporate resident in the United Kingdom" applied to the definition of a holding company throughout Income and Corporation Taxes Act 1970 section 258 subsec-or-para (5)subsec. (5)(b) so that a "holding company" meant a UK resident company the business of which consisted wholly or mainly in the holding of shares or securities of UK resident companies which were its 90 per cent subsidiaries and which were trading companies. On that construction, a company which had 19 foreign subsidiaries but only four UK subsidiaries accounting for one-third of aggregate turnover could not satisfy the conditions in Income and Corporation Taxes Act 1970 section 258 subsec-or-para (5)subsec. (5)(b).
Held, allowing ICI's appeal:
Income and Corporation Taxes Act 1970 section 258 subsec-or-para (5)Subsection 5(1)(b) defined a "holding company" and was not affected by Income and Corporation Taxes Act 1970 section 258 subsec-or-para (7)subsec. (7) which was not a definition of the word "company" wherever it appeared throughoutIncome and Corporation Taxes Act 1970 section 258sec. 258 but merely cut down the operation of that section to cases where a surrendering company and a claimant company were resident in the UK.
1. Sitting alone on 18 January 1990 at Turnstile House 1 [Mr D C Potter QC], a commissioner for the special purposes of the Income Tax Acts, heard the appeal of Imperial Chemical Industries plc ("ICI") brought pursuant to Taxes Management Act 1970 section 42 subsec-or-para (2) section 42 subsec-or-para (3)Taxes Management Act 1970, sec. 42(2) and (3) against the inspector's refusal of group relief in respect of the accounting periods of ICI ending at the end of December, 1984, 1985, 1986 and 1987.
2. Shortly stated the question for determination was whether ICI was entitled to claim group relief having regard to the conditions for surrender of relief contained in the Income and Corporation Taxes Act 1970 section 258Income and Corporation Taxes Act 1970, sec. 258, and in particular to the definition of "holding company" in Income and Corporation Taxes Act 1970 section 258 subsec-or-para (5)sec. 258(5) and whether (on the facts not in dispute) Coopers Animal Health (Holdings) Ltd (a company partly owned by ICI) was a "holding company".
3. No evidence was tendered. An agreed statement of facts … is annexed to and forms part of the case.
4. I took time to consider my decision and gave it in writing on 31 January 1990 determining the appeal by refusing ICI's claim for group relief, but not determining the figures.
5. Immediately after my decision ICI declared to the special commissioner their dissatisfaction therewith as being erroneous in point of law, and on 27 February 1990 required me to state a case.
6. The question of law for the opinion of the court is whether, on the facts agreed, and upon the true construction of Income and Corporation Taxes Act 1970 section 258sec. 258, Coopers Animal Health Holdings Ltd was at the material times a "holding company", so as to enable ICI to found a valid claim for group relief.
On Thursday 18 January 1990 I heard the appeal of Imperial Chemical Industries plc ("ICI") brought pursuant to the Taxes Management Act 1970 section 42 subsec-or-para (2)Taxes Management Act 1970 sec. 42(2)(3) against the decisions given in April and August 1989 in respect of the accounting periods of ICI ending at the end of December 1984, 1985, 1986, and 1987. By those decisions the inspector refused claims for group relief under the Income and Corporation Taxes Act 1970 section 258Income and Corporation Taxes Act 1970 sec. 258 as amended, in particular Income and Corporation Taxes Act 1970 section 258 subsec-or-para (2)subsec. (2) thereof which makes group relief available where a claimant company is a member of a consortium and the surrendering company is a trading company which is a 90 per cent subsidiary of a holding company which is owned by the consortium. At the request of the parties I give my decision in principle, deferring a final determination until after the relevant figures shall have been agreed.
There is no dispute as to the facts, and the parties provided me with an agreed statement of facts, to which was added the further obvious fact that ICI was at all material times a body corporate resident in the UK. The agreed statement of facts was one of the documents in a binder to which reference was made at the hearing. In particular, reference was made to the financial statements of the company Coopers Animal Health (Holdings) Ltd ("CAHH"), which lists the principal subsidiaries of CAHH, 23 in number, all being agreed to be resident in the country of incorporation. Reference was also made to the financial statements of Coopers Animal Health Ltd ("CAH"), the facts set out in the first paragraph in section 2 "review of business developments" being agreed. I refer to the agreed statement of facts so as to incorporate the same in this decision without setting it out. A short summary of the facts suffices for present purposes.
From and after 17 May 1984, when it was incorporated, the issued share capital of CAHH was owned beneficially as to 51 per cent by D Wellcome Foundation Ltd and as to 49 per cent by ICI who together formed a consortium owning CAHH within the meaning of the Income and Corporation Taxes Act 1970 section 258 subsec-or-para (8)Income and Corporation Taxes Act 1970, sec. 258(8) as amended. CAHH carried on no business save the...
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