Worthing Rugby Football Club Trustees v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | THE VICE-CHANCELLOR,LORD JUSTICE CROOM-JOHNSON,LORD JUSTICE NEILL |
| Judgment Date | 26 March 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J0326-5 |
| Docket Number | 87/0411 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 March 1987 |
[1987] EWCA Civ J0326-5
IN TEE SUPREME COURT OF JUDICATURE
COURT OF APPEAL. (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION (REVENUE LIST)
MR JUSTICE PETER GIBSON
Royal Courts of Justice,
The Vice-Chancellor
(Sir Nicolas Browne-Wilkinson)
Lord Justice Croom-Johnson
Lord Justice Neill.
87/0411
MR P.E LAWTON Q.C. and MR E. GRAYSON (instructed by Messrs Miller Parris) appeared on behalf of the appellants.
MR C. McCALL (instructed by the Solicitor of Inland Revenue) appeared on behalf of the respondents.
This is an appeal from a decision of Peter Gibson J. relating to Development Land Tax ("DLT") assessments on the Worthing Rugby Football Club ("the Club"). Shortly stated, the question is whether assessments to DLT were properly made on the Club, which is an unincorporated members' association, or should have been made on the members of the Club.
The facts are fully stated in the judgment of the learned judge which is reported in 1985 STC 186. I can, therefore, state them very shortly. The property of the Club included a sports ground of approximately 6 acres which, pursuant to the Club's rules, was vested in trustees. Rule 7 provided that the trustees should deal with "the trust property" as directed by a resolution of the management committee constituted by the Rules. Under the Rules, on dissolution the property of the Club has to be sold and the proceeds distributed as directed by resolution of the members in general meeting.
The sports ground became very valuable as development land. Pursuant to a direction from the management committee and the members in general meeting, the trustees, on 25th May 1977, contracted to sell 5 1/2 acres for £171,500 and, on 31st May 1978, contracted to sell a further 0.6 of an acre for £26,000.
The Inland Revenue Commissioners raised assessments to DLT in respect of the years ending 31st March 1978 and 1979 upon the Club, as a club, in the sums of £133,058 and £12,813. They also raised alternative assessments to DLT on the trustees of the Club (as opposed to the Club itself) in slightly lower amounts. They further raised two assessments to Corporation Tax on the Club and alternative assessments to Capital Gains Tax on the trustees in respect of those two years. No assessment to any tax on the disposal of the land was raised on the individual members of the Club.
The Special Commissioners held that the assessments to DLT and Corporation Tax on the Club, as such, were erroneous and discharged them. However, the Special Commissioners confirmed the assessments to DLT and Capital Gains Tax on the trustees. On appeal, Peter Gibson J. allowed the Crown's appeal against the discharge by the Special Commissioners of the assessments on the Club in respect of both DLT and Corporation Tax. He accordingly reinstated the assessments on the Club and consequentially discharged the assessments on the trustees. The Club has not appealed against the judge's decision so far as it relates to Corporation Tax, but appeals only against the judge's decision that the Club was properly assessed to DLT. The Crown cross-appeals so as to ensure that, in the event that the appeals against the assessments to DLT on the Club are allowed, the assessment to DLT on the trustees should be reinstated. We have heard argument only on the appeal.
The case turns entirely on the correct answer to the question: "Who, for the purposes of the Development Land Tax Act 1976, ("the 1976 Act") is to be treated as having disposed of the land?". There are three possibilities, viz:
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(1) The Club as such. If this is correct, the assessments on the Club will stand.
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(2) The Trustees. If this is correct, the assessments on the Club will be discharged, but the assessments on the trustees would have been correctly made.
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(3) The individual members of the Club. If this is correct, no assessment has been made on the individual members and, therefore, no DLT will be payable. The reason that no assessment was made on the members as individuals is that each member would have been entitled to an exemption for the first £10,000 of realised development value. Since, at all material times, the Club has had more than 250 members, the cumulative exemptions of each of the members would have eliminated any charge to DLT.
DLT (which has now been abolished) was charged on an actual or deemed realisation of the development value of land. Section 1(2) of the 1976 Act provides as follows:
"Subject to the provisions of this Act, a person shall he chargeable to development land tax on the realised development value, determined in accordance with this Act, which accrues to him on the disposal by him on or after the appointed day of an interest in land in the United Kingdom…."
Accordingly, in order to give rise to any charge to DLT two requirements have to be satisfied: first, there has to be a "disposal" of land; second, such disposal has to be made by "a person". Section 4 defines "realised development value" in terms which again emphasise that such value must accrue to the person who is to be charged to DLT "on the disposal by him of an interest in land".
Section 28 of the 1976 Act deals with property held on a bare trust. Sub-sections (1) and (3) provide as follows:
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"(1) At any time when an interest in land is held on trust—
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(a) for a person absolutely entitled as against the trustees, or
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(b) for a person who would be so entitled but for being an infant or other person under disability,
the Act shall apply as if the interests were vested in, and the acts of the trustees in relation to the interest were the acts of, the person referred to in paragraph (a) or paragraph (b) above (acquisitions from or disposals to the trustees by that person being disregarded accordingly).
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(3) For the purposes of this section, an interest in land is held on trust for a person absolutely entitled as against the trustees where that person has the exclusive right, subject only to satisfying any outstanding charge, lien or other right of the trustees to resort to the interest for the payment of duty, taxes, costs or other outgoings, to direct how that interest shall be dealt with….."
Those are the only provisions of the 1976 Act directly in issue on this appeal, although I will have to notice further sections hereafter.
The Crown's case in support of the assessments on the Club is, in essence, very simple and runs as follows. Prior to the sale of the sports ground, it was vested in the trustees of the Club "for a person absolutely entitled as against the trustees" within the meaning of section 28(1)(a). Under the Rules, the Club (acting through its management committee) was entitled to direct the trustees how to deal with the land and, therefore, the case fell within section 28(3) on the footing that a person (i.e the Club) was absolutely entitled as against the trustees. Therefore the only question is whether the Club, notwithstanding that it is an unincorporated association, is to be treated as a "person" within the meaning of section 28. Section 19 of the Interpretation...
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