The Commissioners of Inland Revenue v B.W. Noble Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 26 November 1926 |
| Date | 26 November 1926 |
| Court | King's Bench Division |
NO. 60*.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
Corporation Profits Tax - Deduction from profits - Remuneration of director with controlling interest - Director holding one half the shares in a company and having casting vote - Finance Act, 1920 (10 & 11 Geo. V, c. 18), Section 53(2)(c).
The chairman of the directors of a company held half the total number of ordinary shares issued, and when presiding at general meetings of the company, was entitled, upon equal division of opinion among the shareholders, to a casting vote. Preference shareholders had no title to vote.
The Commissioners of Inland Revenue in computing the profits of the company for Corporation Profits Tax purposes regarded him as a director having a controlling interest in the company, and, in view of the provisions of Section 53 (2) (c) of the Finance Act, 1920, made no deduction in respect of his remuneration in excess of £1,000 per annum.
The company appealed on this question against the assessments to Corporation Profits Tax made upon it for the accounting periods ending the 30th September, 1920, and the 30th September, 1921.
The Special Commissioners who heard the appeal for the earlier accounting period disagreed and therefore gave their decision in favour of the company, but the Special Commissioners who heard the appeal for the later accounting period held that the said director had a controlling interest in the company within the meaning of the said Section.
Held, that the said director had a controlling interest in the company within the meaning of Section 53 (2) (c) of the Finance Act, 1920.
B.W. NOBLE, LTD. v. THE COMMISSIONERS OF INLAND REVENUE.
THE COMMISSIONERS OF INLAND REVENUE v. B.W. NOBLE, LTD.
CASE
Stated under the Finance (No. 2) Act, 1915, Section 45(5), and the Finance Act, 1920, Section 56(6), by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at York House, Kingsway, London, on 15th November, 1921, for the purpose of hearing appeals, B.W. Noble, Limited, 78/79 King William Street, in the City of London, hereinafter referred to as the Company, appealed against assessments to Excess Profits Duty and Corporation Profits Tax made upon them by the Commissioners of Inland Revenue under the relative statutory enactments for the undermentioned periods in the amounts stated.
| Excess Profits Duty Accounting Period:- | £ | s. | d. |
| 1st October, 1919, to 30th September, 1920 | 6635 | 15 | 0 |
| Corporation Profits Tax Accounting Period:- | |||
| 1st January, 1920, to 30th September, 1920 | 286 | 8 | 0 |
2. The Company was incorporated as a Company limited by shares on 11th December, 1916, under the Acts relating to companies. The Company has issued 500 Preference and 1000 Ordinary Shares of a nominal value of £1 each. The shares so issued were held as follows during the periods under review in this Case.
| Major B. W. Noble | 500 | Ordinary | Shares |
| Mr. C. E. Haylor | 300 | ||
| Monsieur Gabus | 200 | ||
| 1000 | Ordinary | Shares | |
| Mrs. Noble (Major Noble's wife) | 499 | Preference | Shares |
| Captain Spencer Silver | 1 | Share | |
| 500 | Preference | Shares. |
The Company is a private company. A copy of its Memorandum and Articles of Association as amended is attached hereto marked "A" and forms part of this Case.(1)
Under the Articles of Association of the Company the first directors of the Company were Major Noble, Mrs. Noble, and Mr. Haylor. Major Noble has been appointed Chairman and Managing Director, and as such he is entitled by the incorporation in the said Articles of certain provisions of Table A of the first Schedule to the Companies (Consolidation) Act, 1908, to preside at any General Meeting of the Company and upon equal division of opinion among the shareholders to have a casting or deciding vote. Holders of Preference Shares are not entitled to any vote.
3. The Company was formed to carry on the business of an insurance and re-insurance broker and agent previously carried on by Major Noble in London and since its incorporation it has carried on this business.
The objects of the Company as specified in Clause 3 (B) of its Memorandum of Association are:-"To carry on business as fire, life, accident, third party, burglary, mortgage, contingency, employers' liability, marine or any other insurance or reinsurance, brokers and agents for and London managers of the business of any British, colonial or foreign insurance or re-insurance company, and any other trade or business whatsoever, which can, in the opinion of the Board be advantageously carried
on by the Company in connection with or as ancillary to the general business of the Company." The insurance business done by the Company has been a brokerage business consisting in placing insurances for clients, mainly against risks of fire, for a commission payable to it as broker upon the work done. The re-insurance business has been done for a limited number of companies for which it acts as manager and/or agent in accordance with letters of appointment and powers of attorney granted to it by such companies. A copy of a Letter of Appointment and Power of Attorney attached hereto (marked "B") and forming part of this Case(1) shows the nature of the work carried out by the Company in re-insurance.4. Major Noble's business was commenced in or about the year 1913 and in the year 1915 or 1916 he first obtained business from Paris carrying out such business at his London Office. This business consisted entirely of brokerage business and arose through French brokers sending risks to be placed in London. The Company was anxious to extend this business and Monsieur Gabus, who had first been employed by Major Noble on salary and commission in October, 1916, and who had an important general business connection in England and France, was made a Director of the Company in April, 1919. Sometime in 1919 it was also suggested to the Company by (a) one or two of the companies for which it did re-insurance work in London and (b) certain companies for which no such work had been done, that it should open an office in Paris for the purpose of representing them there. In pursuance of their objects on 1st September, 1919, resolutions were passed by the Directors which were recorded in their minutes as follows:-
The proposal to open offices in Paris was fully discussed and ultimately on the motion of the Chairman seconded by Mr. Haylor it was unanimously resolved:-
That a branch office of the Company be opened in Paris as soon as possible in order that the Company may adequately represent British Companies in France and increase and improve the present brokerage and reinsurance business of the Company there.
On the motion of the Chairman seconded by Mr. M.E. Gabus it was further resolved that:-
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Mr. C.E. Haylor be requested to proceed to Paris with one other Director for the purpose of selecting an Office and organising the same and
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That a sum not exceeding £1,000 be reserved for travelling and other expenses incidental to the formation and organisation of the Paris Office.
On the 15th September, 1919, the following resolution was passed by the Directors.
The Form of Authority to be given to Mr. Haylor for use in Paris was considered and it was resolved that a Power of Attorney be sealed in his favour authorising him to secure suitable offices and to execute a Lease for same and also to open a Banking Account with Lloyd's Bank (France) Limited in the name of the Company, such Banking Account to be operative by the signature of any one Director.
On the 17th September, 1919, a further resolution was passed by the Directors in the following terms:-
The Secretary read Power of Attorney in favour of Mr. Haylor for use in Paris.
On the motion of the Chairman seconded by Mr. Gabus it was resolved that the Power of Attorney be approved and the Common Seal of the Company be affixed thereto.
The Common Seal was affixed thereto accordingly and duly attested.
A copy of the said Power of Attorney is hereto annexed marked "C" and forms part of this Case.(1)
5. In accordance with the above resolutions offices were immediately taken and a branch of the Company was opened in Paris. The business in Paris was at first conducted through a Manager (Mr. O'Neill), who resided permanently in Paris, under the superintendence of one or other of the Directors of the Company who visited Paris from time to time and held powers of attorney to act on behalf of the Company. It was soon found, however, that the conditions under which fire insurance business is conducted in France do...
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