Worthing Rugby Football Club Trustees v Commissioners of Inland Revenue

JurisdictionEngland & Wales
Judgment Date07 December 1984
Date07 December 1984
CourtChancery Division
[CHANCERY DIVISION] WORTHING RUGBY FOOTBALL CLUB TRUSTEES v. INLAND REVENUE COMMISSIONERS SAME v. SAME 1984 Dec 5, 6, 7 Peter Gibson J.

Revenue - Capital gains tax - Unincorporated association - Property of club vested in trustees - Gains accruing on trustees selling land used by club for development - Whether trustees or club liable to tax in respect of gains - Whether club to be treated as assessable entity - Finance Act 1965 (c 25), s 22(5) - Finance Act 1969 (c 32), Sch 19, para 9 - Revenue - Development land tax - Unincorporated association - Land for use of club held by trustees - Realised development gains on sale of land - Whether club or trustees liable to tax - Whether club itself assessable to tax - Development Land Tax Act 1976 (c 24), s 28(1)(3)

A club was founded as an unincorporated members' association in 1920. In 1926 it had acquired in excess of six acres of land for use as its sport grounds. The written rules of the club provided, inter alia, that the club's property was to be vested in trustees. In 1977 the trustees of the club sold five and a half acres of the land for £171500 and a year later they sold the remaining land for £26000. In respect of those transactions the club was assessed to corporation tax in respect of chargeable gains for its accounting periods to 30 April 1978 and 30 April 1979 in sums of £35700 and £14300 respectively and alternative assessments to capital gains tax were made on the club's trustees for the years 1977–78 and 1978–9 in sums of £36000 and £14000 respectively. Further assessments to development land tax were made on the club for the financial years ended 31 March 1978 and 31 March 1979 in the sums of £133058 and £12813 respectively and alternative assessments to that tax for the same financial years were made on the club's trustees in sums of £127695 and £11834 respectively. The trustees appealed against all the assessments. The special commissioners determining the appeals discharged the assessments to corporation tax (in so far as they related to the disposals of land) and to development land tax made on the club and confirmed in principle those made on the trustees. In relation to the corporation tax and capital gains tax appeals, the trustees' contention that they had held the land as bare trustees for the club's members and that by virtue of section of 22(5) of the Finance Act 1965F1 and paragraph 9 of Schedule 19 to the Finance Act 1969F2 the disposals had to be treated as disposals by the individual club members (each one of whom would be entitled to an annual exemption from capital gains tax) was rejected by the commissioners. In relation to the development land tax appeals a similar contention by the trustees founded on the provisions of section 28(1) and (3)F3 of the Development Land Tax Act 1976 that would result in no tax being payable, having regard to the annual exemptions to which each club member was entitled, was also rejected. The commissioners further rejected the Crown's contention that in relation to the taxes the club itself was the entity to be assessed.

On appeals by the trustees and cross-appeals by the Crown from the commissioners' determinations:—

Held, allowing the Crown's cross-appeals and thus also the trustees' appeals, (1) that although under the general law an unincorporated association such as a club was not a legal entity, it could be treated as an entity of assessment to corporation tax in respect of its income or its chargeable gains; that notwithstanding that such an unincorporated association was incapable of owning property, the effect of section 1 of the Interpretation Act 1889 was that the word “person” in section 22(5) should, unless a contrary intention appeared, be taken to include an unincorporated association; that, since the trustees were bare trustees of the land for the club itself, the club was to be treated for the purposes of section 22(5) of the Act as being capable of acquiring, owning and disposing of land and thus as an entity to which chargeable gains could accrue; and that, accordingly, it was the club itself, and not the trustees or the individual members of the club, that was liable to the tax on the chargeable gains accruing on the disposals of the land (post, pp. 413D, 414G, 416E–H, 417A–C).

(2) That although the statutory provisions relating to development land tax were separate from those relating to capital gains tax, nevertheless in the light of section 1 of the Interpretation Act 1889 and the provisions of the Development Land Tax Act 1976 and the Taxes Management Act 1970, the club itself was to be regarded an an entity of assessment to that tax also and thus liable in respect of the realised development value of the land disposed of by virtue of the provisions of section 28 of the Development Land Tax Act 1976 (post, pp. 417C–D, 418A–B, 419C–D).

The following cases are referred to in the judgment:

American Foreign Insurance Association v. Davies (1950) 32 T.C. 1

Carlisle and Silloth Golf Club v. Smith (1913) 6 T.C. 198, C.A.

Conservative and Unionist Central Office v. Burrell [1982] 1 W.L.R. 522; [1982] 2 All E.R. 1 C.A.

Income Tax General Purposes Commissioners for City of London v. Gibbs [1942] A.C. 402; [1942] 1 All E.R. 415; 24 T.C. 221, H.L.(E.)

Leahy v. Attorney-General for New South Wales [1959] A.C. 457; [1959] 2 W.L.R. 722; [1959] 2 All E.R. 300, P.C.

The following additional cases were cited in argument:

Abbatt v. Treasury Solicitor [1969] 1 W.L.R. 1575; [1969] 3 All E.R. 1175, C.A.

Booth v. Ellard [1980] 1 W.L.R. 1443; [1980] 3 All E.R. 569, C.A.

Kidson v. Macdonald [1974] Ch. 339; [1974] 2 W.L.R. 566; [1974] 1 All E.R. 849; 49 T.C. 503

Neville Estates Ltd. v. Madden [1962] Ch. 832; [1961] 3 W.L.R. 999; [1961] 3 All E.R. 769

Sick and Funeral Society of St John's Sunday School, Golcar, In re [1973] Ch. 51; [1972] 2 W.L.R. 962; [1972] 2 All E.R. 439

Stephenson v. Barclays Bank Trust Co. Ltd. [1975] 1 W.L.R. 882; [1975] 1 All E.R. 625; 50 T.C. 374

Tomlinson v. Glyns Executor and Trustee Co [1970] Ch. 112; [1969] 3 W.L.R. 310; [1970] 1 All E.R. 381; 45 T.C. 600, C.A.

CASES STATED by the Commissioners for the Special Purposes of the Income Tax Acts.

By contracts dated 25 May 1977 and 31 May 1978, the trustees of the Worthing Rugby Football Club sold in two lots the club's freehold sports ground at Castle Road, Tarring, West Worthing to Worthing Borough Council and West Sussex County Council. In respect of those transactions assessments were raised as follows: on the club to development land tax for the financial years ended 31 March 1978 and 31 March 1979 in the sums of £133058 and £12813 respectively and alternative assessments to that tax for the same financial years on the trustees in sums of £127695 and £11834; on the club to corporation tax in respect of chargeable gains for its accounting periods to 30 April 1978 and 30 April 1979 in sums of £35700 and £14300 respectively and alternative assessments to capital gains tax on the trustees for the years 1977–8 and 1978–9 in sums of £36000 and £14000 respectively. Mr Ronald Frampton and Mr Geoffrey Campbell, the surviving trustees of the club, appealed against all the assessments. On 19 August 1981 the special commissioners determined that the assessments to development land tax on the club should be discharged but they confirmed in principle those on the trustees. On 5 October 1982 the special commissioners determined that the assessments to corporation tax should not include any sums in respect of chargeable gains accruing on the sales and they confirmed the assessments on the trustees in adjusted amounts as follows: 1977–78 of £31513, and 1978–79 of £12754.

The trustees appealed against the commissioners' determinations and the Crown cross-appealed.

The facts are set out in the judgment.

Philip Lawton Q.C. and Edward Grayson for the trustees.

Robert Carnwath for the Crown.

PETER GIBSON J. These are appeals by the trustees of the Worthing Rugby Football Club (“the club”) and cross-appeals by the Inland Revenue Commissioners against determination by the special commissioners on 19 August 1981 and 5 October 1982 respectively. By those determinations the commissioners confirmed assessments to capital gains tax and development land tax on the trustees in adjusted but agreed amounts, and discharged assessments to corporation tax and development land tax on the club (the corporation tax assessments only so far as they related to the disposal of land to which I shall be referring). The club is an unincorporated members' association, and the questions raised by these appeals and cross-appeals are as to the treatment for the purposes of those three taxes of gains arising on the disposal of development land held by the trustees of such an association.

The club was founded on 10 September 1920. On 30 April 1926 more than six acres of land as Castle Road, Tarring, West Worthing, were acquired and conveyed to trustees of the club. The land was used as the club's sports ground and clubhouse. At all times until the disposal the land was held subject to the written rules of the club. It is unnecessary to refer to the earlier rules of the club. By 1 May 1977 the rules contained the following, amongst other, provisions. Rule 2 contained the objects of the club. They included: “to organise and encourage the playing of rugby football by amateurs” and...

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