Interfish Ltd v Revenue and Customs Comrs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moses,Lord Justice Patten,Master of the Rolls |
| Judgment Date | 27 June 2014 |
| Neutral Citation | [2014] EWCA Civ 876 |
| Docket Number | Case No: A3/2013/2566 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 June 2014 |
[2014] EWCA Civ 876
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (Tax and Chancery Chamber)
THE HONOURABLE MR JUSTICE BIRSS
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Dyson, Master of the Rolls
Lord Justice Moses
and
Lord Justice Patten
Case No: A3/2013/2566
Mr J Peacock QC (instructed by Forbes Hall Llp) for the Appellant
Mr Owain Thomas (instructed by Her Majesty's Revenue and Customs) for the Respondent
Hearing date: 12 th May, 2014
In three accounting periods between 2003 and 2006, the holding company of a group of companies involved in the fishing industry paid about £1.2 million to Plymouth Albion, one of the largest rugby clubs in the South West. The club was in severe financial difficulties. Although it drew considerable crowds when playing in the Rugby Football Union's National Division 1 and national cup competition, it needed substantial sums to make up a deficit in its player budget and to improve, amongst other things, its squad of players.
Interfish's fishing business included fishing, fish processing and wholesaling, and a fish retailing business based in Plymouth. Payments were of benefit to Interfish because they visibly promoted South West Foods and made it easier to obtain bank funding for its expansion.
Judge Nicholas Paines QC, sitting as the First-tier Tribunal (Tax Chamber), found two purposes in the making of the payments. The payments were made in order to improve the financial position of the rugby club and to ensure that those involved in the club would look favourably upon Interfish in ways that would assist its trade (FTT paragraph 47). In its computation of profits for the purposes of Corporation Tax, Interfish sought to deduct the payments made in its accounts under the heading Advertising and Marketing. The First-tier Tribunal and, on appeal, the Upper Tribunal [2013] UK UT 0336 (TCC), held that those disbursements were not deductible because they were not "wholly and exclusively laid out or expended for the purposes of the trade" (s.74(1) of the Income and Corporation Taxes Act 1988).
The provisions in s.74(1)(a) first appeared in the Income Tax Act 1842. Courts have never wavered from the proposition that the business purpose must be the sole purpose. You might have thought, therefore, that once it had been found as a fact by the First-Tier Tribunal that the payments by Interfish had two purposes, that was the end of its appeal. If you had thought that, you had not reckoned with the advocacy of Mr Peacock QC. In beguiling submissions, he accepted that essential proposition but argued that Interfish did, in fact, have only one purpose in making its payments and that was a business purpose. The purpose of improving the financial position of the rugby club was merely a necessary and intermediate purpose on the way to the sole and ultimate purpose of improving the financial position of Interfish (and the FTT had so found – FTT paragraphs 47, 48). Where, he asserts, there are two purposes, but one is merely an intermediate purpose, on the road to a final purpose, then the requirements of s.74(1)(a) are satisfied. The purpose of Interfish was to improve the financial position of the rugby club in order to achieve Interfish's ultimate business purpose. That satisfies the requirement that the payments were made exclusively for the purposes of Interfish's trade. The failure, either of the FTT or the Upper Tribunal, to recognise that one purpose may be intermediate or incidental to the ultimate purpose, namely, a trade advantage, amounted to an error of law.
As I have already indicated, Mr Peacock QC was not foolhardy enough to seek to gainsay the proposition of law that the statutory restriction on deductibility requires the business purpose to be the sole purpose. If authority is needed for so elementary a proposition, it can be found in the judgment of Romer LJ in Bentley Stokes and Lowless v Beeson [1952] 33 TC 491 at 504. The proposition was repeated by Lord Brightman in Mallalieu v Drummond [1989] 2 AC 861 at 870:-
"If it appears that the object of the taxpayer at the time of the expenditure was to serve two purposes, the purposes of his business and other purposes, it is immaterial…that the business purposes are the predominant purposes intended to be served."
Nothing daunted by so clear a statement of principle, Mr Peacock QC seeks to find in Bentley authority for the proposition that an intermediate purpose on the way to achieving an ultimate purpose may be disregarded. The authority for his proposition, he says, is to be found in Bentley itself. In happier days, partners in the solicitors firm of Bentley Stokes and Lowless lunched their existing clients in a social club in St. James's Street or in restaurants in the West End. The Special Commissioners found as a fact that there was a social element in the lunches, forming part of the "motive" in providing hospitality (page 84F). It was this element on which the Revenue relied in seeking to reverse the decision of Roxburgh J, who had himself reversed the decision of the Special Commissioners, who had regarded the social element as precluding the...
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Marlborough DP Ltd
...Bentleys, Stokes & Lowless v Beeson (HMIT) (1952) 33 TC 491 at p. 503 (as approved by the Court of Appeal in Interfish Ltd v R & C Commrs [2014] BTC 34) that: if, in truth, the sole object is business promotion, the expenditure is not disqualified because the nature of the activity necessar......
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Stephen Hoey & Others v Commissioners for HM Revenue & Customs
...a benefit on a third party. One example cited to us was the decision of this court in Interfish Ltd v Revenue & Customs Commissioners [2014] EWCA Civ 876, [2015] STC 55, where the leading judgment was delivered by Moses LJ (with whom Patten LJ and Lord Dyson MR agreed). In that case, the ......
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Altus Group (UK) Ltd v Baker Tilly Tax and Advisory Services LLP and another
...exclusively to acquire them." That part of the judgment was not subject of appeal. 120 The defendants relied on Interfish Ltd v The Commissioners for HM Revenue and Customs [2014] EWCA Civ 876 as supporting the proposition that the existence of a clear fiscal purpose would be fatal to any c......
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BNP Paribas SA (London Branch)
...Stokes & Lowless v Beeson (HMIT) TAX(1952) 33 TC 491 at p. 503 (and approved by the Court of Appeal in Interfish Ltd v R & C Commrs TAX[2014] BTC 34) if, in truth, the sole object is business promotion, the expenditure is not disqualified because the nature of the activity necessarily invol......
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Corporate Munificence: Beware
...as having been incurred 'wholly and exclusively' for the purposes of the company's business (see for example Interfish Ltd v HMRC [2014] EWCA Civ 876). However, in cases where the motivation for the expenditure derives in reality not from the purposes of the company but from the will of an ......
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Corporate Munificence: Beware
...as having been incurred 'wholly and exclusively' for the purposes of the company's business (see for example Interfish Ltd v HMRC [2014] EWCA Civ 876). However, in cases where the motivation for the expenditure derives in reality not from the purposes of the company but from the will of an ......