Lord Nuffield v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 26 June 1946 |
| Date | 26 June 1946 |
| Court | King's Bench Division |
NO. 1391-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax - Exemption - Charitable purposes - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Section 37 (1) (b).
The Appellant in the first case was the sole ordinary trustee of a Foundation established in 1943 for purposes set out in the trust deed "so, far as the same are charitable purposes according to the law of "England". In the accounting year ended 31st March, 1944, the Foundation paid £25,500 out of its income of £350,225 as a grant to the Guarantee Fund the trustees of which were the Appellants in the second case. The object of the Guarantee Fund, as set out in the preamble to its trust deed, was "the promotion of mutual insurance "associations formed to assist the members thereof to meet expenditure "necessitated by illness".
The Appellants claimed exemption from Income Tax under Section 37 (1) (b) of the Income Tax Act, 1918, in respect of certain income of the Foundation and the Guarantee Fund for the year 1943-44, on the grounds that the Guarantee Fund was established for charitable purposes only and that the grant of £25,500 (representing a gross sum of £51,000 for assessment purposes) by the Foundation to the Guarantee Fund was an application of income to charitable purposes. The Special Commissioners dismissed the claims of both the Foundation and the Guarantee Fund.
Held, that the Special Commissioners' decisions were correct.
(1) Lord Nuffield as Ordinary Trustee of the Nuffield Foundation v. Commissioners of Inland Revenue
CASE
Stated under the Finance Act, 1925, Section 19 (3), and Income Tax Act, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 3rd May, 1945, the said Commissioners heard a claim by the Rt. Hon. William Richard Viscount Nuffield of Nuffield as the ordinary trustee of the Nuffield Foundation (hereinafter called "the Appellant") for exemption from Income Tax under Section 37 of the Income Tax Act, 1918, in respect of certain investment income, for the year 1943-44.
It was admitted on behalf of the Commissioners of Inland Revenue (hereinafter called "the Respondents") that the Nuffield Foundation was a body of persons or trust established for charitable purposes only and was therefore entitled to exemption from Income Tax in respect of so much of its income as was applied to charitable purposes only. The sole question raised for our decision was whether a sum of £25,500 paid by the Appellant in the said year, out of the income of the Nuffield Foundation for that year, to the trustees of a separate fund known as the "Nuffield Provident Guarantee Fund" was a sum which had been "applied to charitable purposes only" within the meaning of Section 37 aforesaid, so as to entitle the Appellant to exemption from tax on so much of the gross income (namely, £51,000) of the Nuffield Foundation as was attributable to the said sum of £25,500.
2. The Nuffield Foundation was established by a deed of trust dated 9th June, 1943, and made between the Rt. Hon. William Richard Viscount Nuffield of Nuffield (thereinafter called "Lord Nuffield") of the one part and Sir William Macnamara Goodenough (deputy chairman of Barclays Bank, Ltd.) and the six other persons therein named of the other part, which seven persons of the other part are, by clause 1 (C), constituted "the Managing Trustees".
A print of the said deed is hereto annexed, marked "A", and forms part of this Case(1).
By this deed Lord Nuffield settled the investments set out in the schedule thereto, namely, 4000,000 ordinary stock units of 5s.each of Morris Motors, Ltd. upon himself and any other persons who should thereafter be appointed trustees jointly with him (referred to in clause 1 (B) as "the Ordinary Trustees") upon the trusts hereinafter mentioned. The said stock units, together with any other property which might thereafter become vested in the ordinary trustees, either by virtue of their ownership of the said stock units or as a result of any transfer of further property to them by Lord Nuffield, constitute "The Nuffield Fund" (clause 1 (F)).
At all material times Lord Nuffield was the sole trustee of the Nuffield Fund and the sole ordinary trustee of the Nuffield Foundation.
By virtue of clauses 1 (G), 7 and 11 any gifts of money or other property for the advancement of the objects of the Foundation from persons other than Lord Nuffield constitute "The Auxiliary Fund" which is to be held by the managing trustees upon the said trusts.
3. The deed recites: "Whereas Lord Nuffield believing that "those individual resources which can only be built up by private "enterprise and which are freely given in the service of the community "are a vital factor in the growth of Commonwealth has determined "to provide that the investment mentioned in the Schedule "hereto shall forthwith be held upon the charitable trusts and subject "to the provisions hereinafter declared and contained and may "hereafter provide that other investments shall be held on the like "trusts."
Clause 1 (A) defines "The Foundation" as meaning "the trust "constituted by this Deed", and clause 25 provides: "The Trust shall "be called The Nuffield Foundation."
Clause 1 (H) provides: ""The objects of the Foundation" shall "mean the following purposes or any of them but only so far as "the same are charitable purposes according to the law of England "namely (i) the advancement of health and the prevention and relief "of sickness by such means as the Ordinary Trustees and the Managing "Trustees shall in their absolute discretion think fit and in "particular but without prejudice to the generality of that discretion "by medical research and teaching and by the organisation and development "of medical and health services (ii) the advancement of "social well-being by such means as the Ordinary Trustees and the "Managing Trustees shall in their absolute discretion think fit and "in particular but without prejudice to the generality of that discretion "by scientific research and the organisation development and "improvement of technical and commercial education including the "training of teachers and the provision of scholarships and prizes "(iii) the care and comfort of the aged poor and (iv) such other "charitable purposes as shall be declared in writing (a) by Lord "Nuffield in his lifetime and (b) after his death by all the Ordinary "Trustees and Managing Trustees."
Clause 6: "The Ordinary Trustees shall hold the Nuffield Fund "and the Managing Trustees shall hold the Auxiliary Fund upon "trust to apply the income of the Nuffield Fund and the income and "capital of the Auxiliary Fund (first) in saving harmless and keeping "indemnified the Ordinary Trustees and Managing Trustees and "any persons appointed by the Ordinary Trustees and the Managing "Trustees respectively under the provisions hereof to be members of "any Board or Committee or Officers of the Foundation and each "of them and their respective executors administrators and assigns "estates and effects from and against all actions proceedings claims "and demands costs damages and expenses arising out of any act "deed matter or thing whatsoever made done executed omitted or "neglected by the Ordinary Trustees the Managing Trustees or any "such person appointed by them as aforesaid in the execution or the "purported execution of the trusts hereof or otherwise howsoever "in relation to the premises save only any breach of trust arising "from the wilful default of the person who is sought to be made "liable and (secondly) in defraying the expenses of carrying into "effect the objects of the Foundation (including the expenses incurred "in or about the completion of this Deed and any deed supplemental "hereto) And subject thereto shall hold the income of the "Nuffield Fund and the income and capital of the Auxiliary Fund "upon trust to apply the same in promoting the objects of the "Foundation in accordance with the provisions of this Deed."
Clause 16: "(A) If any dispute or difference shall arise between "the Ordinary Trustees and the Managing Trustees as regards their "respective powers authorities and discretions hereunder or otherwise "in relation to the provisions hereof the same shall be determined "by the Ordinary Trustees and the Managing Trustees shall "abide by and give effect to such determination.
"(B) If the Ordinary Trustees or the Managing Trustees are "at any time in doubt as to whether any proposed application of the "income of the Nuffield Fund or of the capital or income of the "Auxiliary Fund is hereby authorised as being for one of the charitable "purposes which are the objects of the Foundation they may "respectively make such application to the Chancery Division of the "High Court of Justice as they may be advised for determination of "the question whether such proposed application is so authorised "and the costs of any such application if made by the Ordinary "Trustees shall be borne by the income of the Nuffield Fund or if "made by the Managing Trustees out of the capital or income of the "Auxiliary Fund as the Managing Trustees may think fit."
Clause 26: "At any time during his life Lord Nuffield may by "Deed and after his death the Ordinary Trustees may by Deed "executed with the consent in writing of all the Managing Trustees "for the time being in office and subject as hereinafter provided "revoke or vary any of the provisions of this deed so far as they "affect the Nuffield Fund but so that no such revocation or variation "shall extend to vary or affect the definition of the objects of the "Foundation as contained in Clause 1...
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