Robinson v Scott Bader Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,LORD JUSTICE OLIVER,LORD JUSTICE FOX |
| Judgment Date | 19 May 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J0519-2 |
| Docket Number | 81/0202 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 May 1981 |
[1981] EWCA Civ J0519-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(REVENUE PAPER) (FINAL LIST)
(MR. JUSTICE WALTON)
Royal Courts of Justice,
Lord Justice Waller
Lord Justice Oliver
and
Lord Justice Fox
81/0202
1979 No. 49
MR. D.C. POTTER Q.C. and MR. M. HART (instructed by The Solicitor of Inland Revenue, London WC2R 1LB) appeared on behalf of the Appellant (Appellant).
MR. J.M. TALLON (instructed by Messrs. Jaques & Co., Solicitors, London WC1R 5HR) appeared on behalf of the Respondent (Respondent).
This is an appeal from a decision of Mr. Justice Walton dismissing an appeal from the Commissioners for the General Purposes of Income Tax for the Division of Welling-borough. The appellant company had claimed to deduct the sum of £16,354 from an assessment to corporation tax but the Inspector had not allowed the deduction. The appeal to the Commissioners was allowed and Mr. Justice Walton dismissed an appeal from their decision.
The accounting period with which the case is concerned was a period of 53 weeks ending on 2nd July, 1976. The principal activity of the respondent during that period was the manufacture and marketing of chemical intermediates and synthetic resins. In addition to its subsidiary and associated companies the respondent derives royalty income from licensees in Germany, Italy, Switzerland, South Africa, United States of America and Australia.
The respondent trades in a specialised field dealing with the manufacture and supply of synthetics for fibreglass making. It provides its synthetics as raw materials for its subsidiary and associated companies, licensees and other customers for their manufacturing trades. The respondent also furnishes technical and marketing expertise by means of its own personnel, to its subsidiary and associated companies.
At the beginning of that accounting period the company had acquired the whole of the share capital of the French subsidiary having previously owned 50% of it. After acquiring the 100%, an employee of the respondent, Mr. S. Fearon, was seconded to the French company on the basis that the respondent company would pay his salary and expenses whilst he was in post in France. The sum of £16,354 represents the payments made to him over a period of six months. At the end of that period of six months Mr. Fearon became the Managing Director of the French company, paid directly by it.
The decision of the General Commissioners was that the deduction should be allowed as coming within paragraph (a) of section 130 of the Income and Corporation Taxes Act, 1970. That paragraph prohibits the deduction of any disbursements "not being money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation".
It is not necessary to set out the whole of the facts in the Case Stated, but I shall start with a board meeting held on 25th November, 1974, at which a number of representatives of the respondent company were present. The Case finds that "the respondent's determination to continue activities in France was minuted…" as follows: "Papers were before the meeting from Mr. Trueman setting out the position and from Mr. Broom itemising the points for and against the continuing operations in France". And there followed an account of how the French subsidiary was being operated in France "in a very lean manner as far as staff were concerned and output was high, the margin on sales was low and if these margins could not be increased added throughput would be needed to get above break even level". And the minutes went on: "After further discussion, particularly on the desirability for our continuing operation in Europe it was unanimously agreed to go ahead with Scott Bader Sturge S.A. with strong support and backing from Wollaston". The minute went on, after saying there were two further decisions to be made, "on 31st March, 1975, the respondent acquired 100% interest in the French company and following the departure of the Managing Director of the French company Mr. S. Fearon, an employee of the respondent, acted as Manager, which provided the French company with necessary technical and marketing expertise."
Mr. Fearon was seconded to the French company on the basis that the respondent would pay his salary, expenses and social costs whilst he was in post in France. This was done and as I have already said, he was paid £16,354 in respect thereof. There followed in the Case certain findings of fact:
"(j) There is another firm in France named Wauquier SA, which is not a subsidiary or associated company of the Respondent and with which the Respondent deals at arm's length as an ordinary customer. Primarily the Respondent's business and trading in France is served directly through the French company.
"(k) Direct sales by the Respondent to Wauquier SA were of specialist products for use only with prerequisite basic products. These basic products were supplied by the French company because substantial transportation costs ruled out supply from the U.K. Without the French company to supply the basic products, sales by the Respondent of specialist products to Wauquier SA would have been lost.
"(l) The position of the French company vis-a-vis the Respondent was unique, the rescue operation being undertaken to further the Respondent's business in...
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