Peterborough Royal Foxhound Show Society v. Commissioners of Inland Revenue

[1936] 1 All ER 813

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Between: Peterborough Royal Foxhound Show Society
And: Commissioners of Inland Revenue

Court:

Judge: Lawrence J

Subject References:
taxation
Income tax
Exemption
Charity
Society to promote interests of foxhound breeding
Agricultural society

Legislative References:
Income Tax Act 1918 (c 40) - s 37
Finance Act 1921 (c 32) - s 30
Finance Act 1923 (c 14) - s 11
Finance Act 1924 (c 21) - s 23
Finance Act 1927 (c 10) - s 24

Case References:
Income Tax Special Purposes Commissioners v Pemsel - [1891] AC 531; 28 Digest 10, 51
Re Macduff, Macduff v Macduff - [1896] 2 Ch 451; 8 Digest 296, 731
Re Nottage, Jones v Palmer - [1895] 2 Ch 649; 8 Digest 265, 226
Inland Revenue Commissioners v Yorkshire Agricultural Society - [1928] 1 KB 611; 13 Tax Cas 58; Digest Supp.
General Medical Council v Inland Revenue Commissioners, English Branch Council of General Medical Council v Inland Revenue Commissioners - (1928), 13 Tax Cas 819; Digest Supp.
A-G v National Provincial & Union Bank of England - [1924] AC 26; Digest Supp.

Hearing date: 20 March 1936
Judgment date: 31 March 1936

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A society was formed to promote the interests of foxhound breeding in the United Kingdom and for that purpose to hold annually a foxhound show. The funds and income of the society, including the net proceeds of the show, were applied solely towards the promotion of the purposes of the society and no profits were in any event distributable among the members. The surplus assets in the event of a winding up were to be applied to a charitable purpose. The society was assessed in respect of the balance of its profits and gains and in respect of interest on War Loan. The society claimed exemption from income tax as a charity within the Income Tax Act 1918, s 37, and the Finance Act 1921, s 30, as amended by the Finance Act 1927, s 24, or alternatively as an agricultural society within the Finance Act 1924, s 23 from income tax in respect of profits from its shows:-

Held-

(i)

the society was an agricultural society and exempt from income tax in respect of profits from its shows.

(ii)

the society was not established for a purpose directly benefiting the community as a whole and was not therefore established "for charitable purposes only." It was not, therefore, exempt from income tax on the proceeds of its investments.

Notes

It is one of the main essentials of a "charitable purpose" that it shall be both of public utility and directly beneficial to the community as a whole. The public utility requirement may be satisfied whilst the purpose is only of direct benefit to a small class of the community. In deciding who derives the benefit from the purpose, it is important to consider the constitution of the society and the object with which it was formed, as well as the practical results of its being carried on. In the present case it was thought that the main benefit from the operation of this society was confined to the comparatively small class who are concerned with foxhunting.

As to Charitable Purposes in respect of Income Tax, see Halsbury (Hailsham Edn), Vol 17, pp 310-317, paras 617-624; and for Cases, see Digest, Vol 28, pp 82-84, Nos 469-483; The Statutes referred to relating to Income Tax are included in Halsbury's Complete Statutes of England, Vol 9: Income Tax Act 1918, s 37, at p 443; Finance Act 1921, s 30, as amended by Finance Act 1927, s 24, at p 629; Finance Act 1924, s 23, at p 656. The Statute relating to Entertainments Duty, Finance Act 1923, s 11, is in Vol 16, p 914.

Case stated

Case stated under the Finance Act 1925, s 19(3) and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.

The Peterborough Royal Foxhound Show Society was formed to promote the interests of foxhound breeding in the United Kingdom and for that purpose to hold annually a foxhound show at which various prizes were awarded, and for admission to which an entrance fee was charged. The whole of the funds and income of the society, including the net proceeds arising from the foxhound show were applied solely towards the promotion of the purposes of the society, and upon a winding up of the society the surplus assets were to be applied to such charitable purpose as the committee should by resolution appoint. If and when a profit was made, such profit could not, under the rules of the society, be distributed among the members of the society for their own use and benefit.

The society were assessed under Sched D. Upon appeal to the Special Commissioners, the society claimed as a charity exemption from income tax under the Income Tax Act 1918, s 37, and under the Finance Act 1921, s 30, as amended by the Finance Act 1927, s 24, and alternatively claimed exemption from income tax in respect of the profits arising from the show on the ground that it was an agricultural society within the meaning of the Finance Act 1924, s 23.

The Special Commissioners held (1) that the society was not a charity and (2) that it was not an agricultural society within the definition in the Finance Act 1924, s 23, and they dismissed the appeal.

The society appealed.