Conservative and Unionist Central Office v Burrell (Inspector of Taxes)

[1982] 2 All ER 1

---

Between: Conservative and Unionist Central Office
And: Burrell (Inspector of Taxes)

Court:

Judges: Lawton LJ
Brightman LJ
Fox LJ

Subject References:
Constitutional
Other Constitutional
Taxation
Corporation Tax
Unincorporated association
Requirements of an unincorporated association
Political party constituted by members of local constituency associations and both Houses of Parliament
Funds raised by party treasurers held by party's central office which provided administrative services to party
Expenditure of funds under control of party leader
Party leader providing link between members of party
Whether party an unincorporated association
Whether central office holding income from funds on behalf of an unincorporated association
Whether central office liable to corporation tax on income from funds

Legislative References:
Income and Corporation Taxes Act 1970 - 526(5)

Case References:
Recher's Will Trusts, Re, National Westminster Bank Ltd v National Anti-Vivisection Society Ltd - [1971] 3 All ER 401; [1972] Ch 526; [1971] 3 WLR 321; 8(1) Digest (Reissue) 297, 398
Bucks Constabulary Widows' and Orphans' Fund Friendly Society, Re, Thompson v Holdsworth - [1978] 2 All ER 571; [1978] 1 WLR 641
Caledonian Employees' Benevolent Society, Re - 1928 SC 633
Clarke v Dunraven (Earl), The Satanita - [1897] AC 59, HL
Forbes v Eden - (1867) LR 1 Sc & Div 568
General Assembly of Free Church of Scotland v Lord Overtoun, Macalister v Young - [1904] AC 515, HL
Gillingham Bus Disaster Fund, Re, Bowman v Official Solicitor - [1958] 2 All ER 749; [1959] Ch 62, CA
Harington v Sendall - [1903] 1 Ch 92I
Leahy v Attorney General of New South Wales - [1959] 2 All ER 300; [1959] AC 457, PC
Price, Re, Midland Bank Executor and Trustee Co Ltd v Harwood - [1943] 2 All ER 505; [1943] Ch 422
Rigby v Connol - (1880) 14 Ch D 482; [1874-80] All ER Rep 592
Smith, Re, Johnson v Bright-Smith - [1914] 1 Ch 937
Smith v Anderson - (1880) 15 Ch D 247; [1847-80] All ER Rep 1121, CA
Thackrah, Re, Thackrah v Wilson - [1939] 2 All ER 4

Hearing date: 9, 10, 11, 12, 13, 16, 17 November 1981
Judgment date: 10 December 1981

---

The Conservative Party was a political party made up of three elements, namely

(i)

the Parliamentary Party comprising those members of both Houses of Parliament who took the Conservative whip,

(ii)

the mass membership represented by the National Union of Conservative and Unionist Associations (the national union) comprising constituency associations, and

(iii)

the party headquarters known as the Central Office, which operated the party organisation and the party's research department.

The party leader, who linked the three elements of the party together, was selected by a ballot of Conservative members of Parliament and presented for election to a party meeting consisting of the Parliamentary Party, Parliamentary candidates and the executive committee of the national union. Party treasurers appointed by the party leader and assisted by a board of finance were responsible for raising party funds. The moneys so raised were under the control of the Central Office and the party leader had power to direct how those moneys were to be spent. The Central Office was assessed to corporation tax on investment income and interest over a five-year period from 1972 to 1976 on the basis that it was an unincorporated association within s 526(5) ^[F1] of the Income and Corporation Taxes Act 1970 and therefore fell within the meaning of 'company' in s 526(5). The Central Office appealed to the Special Commissioners against the assessment contending

(i)

that it was not an unincorporated association,

(ii)

that even if the national union could be said to be an unincorporated association the funds did not belong to the national union since they were administered by the Central Office, and

(iii)

that, in any event, the Conservative Party was an amorphous combination of various elements which lacked the characteristics an unincorporated association and therefore if the funds were owned by the party the income arising therefrom was not assessable to corporation tax.

The Crown accepted that the Central Office was not itself an unincorporated association but contended that the party was, and that the funds held by the Central Office belonged to the party. The Crown based its contention on the submission that the party was linked together both by the powers of the leader and by a contract between the members of the party arising in part out of the rules of the national union, in part out of the rules regulating the party meeting and selection of the leader, and in part out of the rules of the local constituency associations. The Crown further contended that the ownership of the party funds had to be in a body which had legal capacity to own property either as a trustee or as a beneficial owner and that, since the moneys contributed to the party's funds were given for a purpose and could not therefore have been given to a non-charitable trust, it followed that there had to be an unincorporated association which was to be treated as the owner of the funds. The commissioners found that the funds held by the party treasurers for the use of Central Office were held on behalf of the members of an unincorporated association, which they identified as the Conservative Party, comprising all the members of the local constituency associations together with the members of both Houses taking the party whip, and accordingly upheld the assessments. The judge allowed an appeal by the Central Office. The Crown appealed.

Held - Since a 'company' within s 526(5) of the 1970 Act included any body corporate or unincorporated association but not a partnership, it was clear that for the purposes of the 1970 Act the word 'company' had a meaning extending beyond a body corporate but not as far as a partnership, and it was to be inferred that 'unincorporated association' in the context meant two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which had rules which identified in whom control of it and its funds rested and on what terms and which could be joined or left at will. Since there were no mutual understandings between all the members of the Conservative Party, no mutual rights and obligations and no rules governing control, which clearly lay in the leader of the party, and since no occasion could be identified when any agreement was made bringing into existence any association, it followed that the funds and the income therefrom held by the Central Office of the party were not held on behalf of an unincorporated association. The appeal would accordingly be dismissed (see p 4 a to c f g j, p 5 f h j, p 6 d to h, p 7 a b and p 8 e f, post).

Per curiam. The treasurer of an organisation which receives and applies funds from multifarious sources for certain political purposes has authority to add to the mixed fund money paid to him by contributors; and once that money has, with the authority of the contributor, been mixed with other money the contributor's mandate becomes irrevocable and he has no legal right to demand the return of his contribution. The contributor has, however, a remedy against the recipient (ie the treasurer or the officials at whose direction the treasurer acts) to restrain or make good a misapplication of the mixed fund except so far as it may appear on ordinary accounting principles that his own contribution was spent before the threatened or actual misapplication (see p 6 g h, p 7 g to j and p 8 f post).

Decision of Vinelott J [1980] 3 All ER 42 affirmed.

Notes

For what constitutes an unincorporated association, see 9 Halsbury's Laws (4th edn) para 1201.

For the Income and Corporation Taxes Act 1970, s 526, see 33 Halsbury's Statutes (3rd edn) 681.

Appeal

The Crown appealed against the decision of Vinelott J ([1980] 3 All ER 42, [1980] STC 400) dated 2 April 1980 allowing an appeal by the Conservative and Unionist Central Office by way of case stated (set out at [1980] 3 All ER 44-52) by the Commissioners for the Special Purposes of the Income Tax Acts in respect of their decision confirming assessments to corporation tax made on the Central Office in respect of the years ending 31 March 1972 to 31 March 1976. The facts are set out in the judgment of Lawton LJ.

Cur adv vult