Willis v Peeters Picture Frames Ltd
| Jurisdiction | Northern Ireland |
| Judgment Date | 23 September 1982 |
| Date | 23 September 1982 |
| Court | Court of Appeal (Northern Ireland) |
Northern Ireland Court of Appeal.
Before: Lord Lowry L.C.J., Gibson and Jones L.JJ.
Corporation tax - Relief for trading losses - Change in ownership of company - Whether set-off of losses precluded by major change in nature of conduct of trade - Changes in method of disposal of products - What constitutes a "major change" - Income and Corporation Taxes Act 1970 section 177 subsec-or-para (1)Income and Corporation Taxes Act 1970, sec. 177(1); Income and Corporation Taxes Act 1970 section 247 subsec-or-para (1)247(1); Income and Corporation Taxes Act 1970 section 483483.
This was an appeal by the Crown from a decision of the Special Commissioners that a company retained its entitlement to set off its trading losses because there had been no "major change" in its customers, outlets or markets.
At all material times the company was in the business of manufacturing and selling picture frames and mouldings. In May 1976 its entire share capital was acquired by another company and, in the following three years, a number of changes were put into operation, mainly in relation to the manner of disposal of the company's products.
The Revenue disallowed the company's claim for relief in respect of losses incurred before the change in ownership. It contended that relief was precluded by the operation of Income and Corporation Taxes Act 1970 section 483 subsec-or-para (1)sec. 483(1) of the Income and Corporation Taxes Act 1970. That section provides that no relief will be given where there has been both a change in the ownership of a company and a major change in the nature or conduct of the trade carried on.
The Commissioners looked at the distribution activities of the company both before and after the change of ownership and concluded that the change, which inserted the group distribution companies between the taxpayer and its customers, was not a significant change.
The Crown appealed claiming that the Commissioners had erred in law.
Held, appeal dismissed.
1. The Commissioners did not err in favour of the taxpayer by equating the word "major" with "significant".
2. The Commissioners took into account the variety of considerations on the evidence before them and there is no ground for saying that their conclusion was contrary to the evidence.
Gibson L.J.: The issue in this appeal is whether the Commissioners for the Special Purposes of the Income Tax Acts erred in law in deciding that the company should not be deprived of the relief to which it would otherwise be entitled under Income and Corporation Taxes Act 1970 section 177 subsec-or-para (1)sec. 177(1) of the Income and Corporation Taxes Act 1970 ("the Act") by virtue of the provisions of Income and Corporation Taxes Act 1970 section 483sec. 483 of the Act.
The facts are fully set out in the judgment of the Special Commissioners dated 9 February 1981. In order to indicate the problem I set out a short selection of those facts. Prior to 21 May 1976 the company was engaged independently in the business of manufacturing and selling picture frames and mouldings, but had by that date incurred losses computed as for corporation tax amounting to £87,141.00. On 21 May 1976 the entire share capital in the company was purchased by Mouldings Ltd., a public company, which was the parent of a group of companies ("the group") operating in the same field as the company through two manufacturing companies and five marketing companies. As a result of this transaction the company became a third manufacturing company in the group and in consequence a number of changes were in the course of the following three years put into operation, chiefly in relation to the disposal of the company's products.
The statutory provisions bearing on the matter start withIncome and Corporation Taxes Act 1970 section 247 subsec-or-para (1)sec. 247(1) of the Act which imposes corporation tax for any accounting period on the full amount of a company's profits arising in the period. However, where losses have been incurred an exception to this rule is provided by Income and Corporation Taxes Act 1970 section 177 subsec-or-para (1)sec. 177(1), which briefly provides that where in any accounting period a company incurs a trading loss it may claim that the loss be set off for the purposes of corporation tax against trading income in succeeding accounting periods. It is agreed that the company did make a trading loss in the accounting period to 20 May 1976, that it did subsequently make profits from the trade, and that it made a claim to set off the loss within the period of six years as required by Income and Corporation Taxes Act 1970 section 177 subsec-or-para (10)subsec. (10). If Income and Corporation Taxes Act 1970 section 177sec. 177, therefore, were not qualified by other provisions of the Act, the company would be entitled to the relief. A qualification is, however, provided by Income and Corporation Taxes Act 1970 section 483sec. 483 of the Act, and the question is whether in ruling that the section did not operate to deprive the company of that entitlement the Special Commissioners erred in law.
I now set out the relevant provisions of Income and Corporation Taxes Act 1970 section 483sec. 483. They are Income and Corporation Taxes Act 1970 section 483 subsec-or-para (1) section 483 subsec-or-para (3)subsec.(1) and (3):
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Purchase v Tesco Stores Ltd
...Act 1976 schedule 5 subsec-or-para 23para. 23(1)(b) by the Court of Appeal of Northern Ireland inWillis v. Peeters Picture Frames Ltd. UNK[1983] STC 453. In that case the court upheld a decision of the Special Commissioners in favour of the taxpayer. In delivering the leading judgment Gibso......