The Commisioner was asked whether receipts of an associated company, The Share and Debenture Trust Ltd, were part of a business. The company did not trade, but owned shares in the taxpayer company and a freehold property. The Special Commissioner approached the matter by looking at each of the activities of the associated company and asking in respect of each activity whether it amounted to a business, and then by standing back and asking whether, viewed broadly, it was in each of the relevant years carrying on any business. She concluded that in each of the years the associated company carried on business in the managing and letting of property because the Memorandum of Association showed that it was incorporated for the purpose of carrying on or undertaking business of an investment nature, and in the relevant years (or some of them) payments were made by the associated company for insurance, repairs, renewals, and professional fees. It was also involved in the business of holding and making of investments. It did not only hold them but also paid administration expenses and distributed dividends to its shareholders. Consequently both the holding and the making of investments constituted the carrying on of business. It also made a loan to the taxpayer company, and the activity of making that loan and receiving interest amounted to the carrying on of business. Standing back and considering the activities of the associated company as a whole, the Special Commissioner concluded that in addition to receiving its four sources of income the associated company each year paid administration expenses including remuneration; paid the expenses of managing the residential properties; and distributed its profits to the shareholders. Overall, it was carrying on business in each relevant year.
Dr N Brice: ‘It is possible that, if the only activity carried on by the associated company in this appeal, were the receipt of interest from the deposit at the bank, then this might also have been one of the exceptional cases. However, in this appeal the other three activities of the associated company point to the conclusion that it was carrying on business in the relevant years.’
Judges:
Dr N Brice
Citations:
[2002] STC (SCD) 152
Cited by:
Cited – HM Revenue and Customs v Salaried Persons Postal Loans Ltd ChD 7-Apr-2006
The company had ceased trading, but rental income was still generated from its former premises. The Revenue sought to include the receipt in calculations of whether the company was entitled to a small company corporation tax rate. The Revenue . .
Lists of cited by and citing cases may be incomplete.
Corporation Tax
Updated: 10 May 2022; Ref: scu.242604