Vodafone Cellular Ltd and Others v Shaw (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 20 March 1997 |
| Date | 20 March 1997 |
| Court | Court of Appeal (Civil Division) |
Before Lord Justice Hirst, Lord Justice Millett and Sir John Balcombe
Court of Appeal
Corporation tax - payment of revenue nature - wholly and exclusively for taxpayer's trade
The sterling equivalent of a payment of $30 million by a company in the Racal Electronics group made to extinguish its liability to pay 10 per cent of its annual profits for 15 years to a US company in return for future know-how, was deductible in computing the company's profits for corporation tax purposes. The payment was a payment of a revenue nature and was made wholly and exclusively for the purposes of the company's trade.
The Court of Appeal so held in reserved judgments allowing an appeal by Vodafone Cellular Ltd and dismissing a cross-appeal by the Crown from the judgment of Mr Justice Jacob (The Times February 8, 1995; (1995) STC 353) in which he had upheld the determination of special commissioners and had dismissed Vodafone's claim for loss relief for two accounting periods to March 1986 and 1987 of £1.8 million and £12.7 million respectively. The judge's decision had had the effect of refusing to give effect to claims for group relief made by other companies in the Racal Electronics group.
The Crown was refused leave to appeal to the House of Lords.
In 1982 Racal had sought a licence from the Department of Trade and Industry for a cellular mobile telephone network. The taxpayer was formed as a joint venture company and, to comply with DTI requirements, two other wholly owned subsidiaries were also incorporated, one to run the system and the other to sell the telephones.
In 1983 the taxpayer contracted with Millicom Inc, a US corporation, to...
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Taxation
...(Inspector of Taxes) v Arthur Young McClelland Moores & Co (1989) 62 TC 704 at 757 per Lord Oliver, and Vodafone Cellular Ltd v Shaw (1997) 69 TC 376 at 436–7 per Millett LJ. 17 Vodafone Cellular Ltd v Shaw (1997) 69 TC 376 at 436–7 per Millett LJ. 18 Linslade Post Office & General Store (a......
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