McKinney v Hagans Caravans (Manufacturing) Ltd
| Jurisdiction | Northern Ireland |
| Judgment Date | 19 May 1997 |
| Date | 19 May 1997 |
| Court | Court of Appeal (Northern Ireland) |
Court of Appeal (Northern Ireland).
Carswell LCJ, Nicholson LJ and Pringle J.
Ronald Weatherup QC and Paul Lewis (instructed by the Solicitor of Inland Revenue) for the Crown.
The taxpayer did not appear and was not represented.
Peter Smith QC as amicus curiae.
The following cases were referred to in the judgment:
Birmingham Corp v Barnes (HMIT) ELR[1935] AC 292
DPP v Manners ELR[1978] AC 43
Furniss (HMIT) v Ford TAX(1981) 55 TC 561
Griffiths v Smith ELR[1941] AC 170
Hallamshire Industrial Finance Trust Ltd v IR Commrs WLR[1979] 1 WLR 620
Metropolitan Water Board v Berton ELR[1921] 1 Ch 299
Moore v Hewitt ELR[1947] KB 831
Parsons v FW Woolworth & Co Ltd WLR[1980] 1 WLR 1472
Town Investments Ltd v Department of the Environment ELR[1978] AC 359
Whittingham v Nattrass WLR[1958] 1 WLR 1016
Corporation Tax - Capital allowances - Deduction of subsidies, contributions etc. - Grant from International Fund for Ireland set up by Treaty - Whether fund was a "public authority" - Capital Allowances Act 1990 section 153 subsec-or-para (1)Capital Allowances Act 1990, s. 153(1).
This was an appeal by the Revenue from the determination of the general commissioners for Dalriada in Ballymena that the International Fund for Ireland ("the fund") was not a public authority within Capital Allowances Act 1990 section 153 subsec-or-para (1)s. 153(1) of the Capital Allowances Act 1990 and therefore grants received by the taxpayer from the fund were not to be deducted from expenditure otherwise eligible for allowances.
The fund was established under a Treaty between the Governments of Ireland, the UK and the US. Its objectives were "to promote economic and social advance and to encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland". The fund's only function was to make grants to persons and organisations in pursuance of those objectives.
The taxpayer was a company engaged in developing a large caravan site. It applied for and received from the fund substantial grants for construction of a swimming pool and leisure complex.
The taxpayer was entitled to capital allowances for expenditure on the site, but the Revenue claimed that in computing them the grants paid by the fund fell to be deducted from the capital expenditure pursuant toCapital Allowances Act 1990 section 153 subsec-or-para (1)s. 153(1) of the Capital Allowances Act 1990, which provided that expenditure should not qualify for capital allowances in so far as it was met by, inter alia, a public or local authority.
The case against the Revenue was that bodies which had been held in the past to be public authorities had had executive powers not dissimilar to government action and the criteria establishing their status as public bodies should not be applied in the context of the capital allowances legislation. The context was quite different and the phrase "public authority" should be given a narrow meaning not to include a body which no function other than to disburse grants.
An issue was raised in correspondence between the taxpayer's solicitors and the Revenue as to whether the Court of Appeal had jurisdiction to hear the appeal. It was suggested that the time limits contained in the General Commissioners (Jurisdiction and Procedure) Regulations 1994 as to cases stated by general commissioners had not been complied with, in particular reg. 22(1), which provided that "as soon as may be after the latest date on which representations may be made … the Tribunal whose decision is questioned, after taking into account any representations made under that regulation, shall state and sign the case."
In the present case, the case stated was not signed until some ten months after representations were received by the commissioners in accordance with reg. 21. It was suggested that reg. 22 was mandatory, and, since it could not on any footing be said that the commissioners had signed the case "as soon as may be" after the receipt of representations, there had been a breach of the regulations, which deprived the court of jurisdiction.
Held, deciding as a preliminary issue that the court had jurisdiction and allowing the Revenue's appeal.
1. The indefinite nature of the time prescription, "as soon as may be", indicated that reg. 22 was directory. Therefore, since it would not be right to penalise the Revenue for a delay by the commissioners which was not the fault of the Revenue, the court would exercise its discretion to accept the case stated and entertain the appeal.
2. The phrase "public authority" was intended to bear its natural wide meaning, and it would be an artificial diminution of that meaning to import a requirement that the body in question must have executive powers.
3. The criteria for determining the status of a body as a public authority were: the public source of the constitution of the body; its performance of a public service for the wider good of the public; the degree of public control and accountability; the absence of profit for private citizens; public funding (though not a necessary qualification). Applying those criteria, the fund constituted a public authority within the meaning of Capital Allowances Act 1990 section 153 subsec-or-para (1)s. 153(1) of the 1990 Act.
1. At a meeting of the general commissioners for Dalriada in Ballymena, held on 17 February 1995, Hagans Caravans (Manufacturing) Ltd ("the taxpayer") appealed against the following estimated assessments to corporation tax:
Accounting period |
Amount |
Year ended 31 August 1990 |
£35,000 |
Year ended 31 August 1991 |
£60,000 |
Year ended 31 August 1992 |
£200,00 |
2. The question for determination was whether grants received by the taxpayer, from the International Fund for Ireland fell to be deducted when computing expenditure incurred by the taxpayer for the purposes of claims to capital allowances, and in particular whether the International Fund for Ireland was a "government public or local authority" within the meaning of those words in Capital Allowances Act 1990 section 153 subsec-or-para (1)s. 153(1) of the Capital Allowances Act 1990.
3. The taxpayer was represented by Michael Lavery QC and Brian Kennedy of counsel instructed by James B Kennedy & Co, chartered accountants, of Belfast. The inspector was represented by J Wheeler, inspector of taxes.
[Paragraph 4 listed the documents proved or admitted before the commissioners.]
5. The following facts were proved or admitted:
(i) The taxpayer is a limited liability company incorporated in Northern Ireland. Its registered office is in Ballyclare, County Antrim.
(ii) The taxpayer acquired a caravan site at Ballycastle in 1986 and has undertaken continuous development of that site.
(iii) The taxpayer applied for and was granted financial assistance from the International Fund for Ireland ("the fund"). the taxpayer has received grants amounting to £346,850.
(iv) The amounts of the grants have been expended by the taxpayer in the development of the caravan site. It was agreed between the parties as a matter of principle that, subject to the issue before us, the said expenditure by the taxpayer was of a nature that would attract capital allowances.
(v) The fund was established under an agreement dated 18 September 1986 between the Governments of the UK and of the Republic of Ireland. The fund derived from the Anglo Irish Agreement of 15 November 1985.
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(vi) As to matters relating to the establishment of, purposes of, funding of organisation of, and management of the fund we accept and incorporate herein as facts found the contents of:
(a) the agreement of 18 September 1986 between the Republic of Ireland and the UK;
(b) the Treaty agreement no. 57 of 1986 dated 26 September 1986 between the Republic of Ireland, the UK and the USA;
(c) Statutory Instrument no. 2017 of 1986;
(d) the 1993 annual report.
(vii) For certain of its activities the fund appointed existing government departments with relevant expertise to assist it - no details of the arrangements in this respect were given.
(viii) It was not a purpose of the fund to benefit the National Exchequers of either the Republic of Ireland or the UK.
(ix) The whole of the fund moneys is derived from governments other than the UK primarily that of the USA also Canada, New Zealand and the EC.
6. The following contentions were made on behalf of the taxpayer:
(i) The fund was set up by the governments of the UK and Ireland to distribute bounty given by the USA for the benefit of both parts of the island of Ireland;
(ii) There was no intention to benefit the Exchequers of either the Republic of Ireland or the UK which would happen if the contributions were not eligible for capital allowances.
(iii) It was contended that the fund should provide the maximum benefit to enhance the bounty. As remedying economic disadvantage was regarded as an object of the fund, he submitted that anything which...
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...of Valuation 104 ILTR at page 41 and a Northern Ireland case called McKinney (Inspector of Taxes) v Hagans Caravans (Manufacturing) Ltd. [1997] NI 111. In addition, we were referred to the well-known decision of Eire Continental Trading Company, Ltd. v Clonmel Foods, Ltd. [1955] IR 170 whic......