Inland Revenue Comrs v City of Glasgow Police Athletic Association

A body is established for charitable purposes only where its predominant purpose is charitable and any private benefit to members is merely subsidiary or incidental. A substantial, independent purpose of providing recreation or enjoyment to members prevents charitable status, although the activities also improve the efficiency of a public service and benefit the public.

For income tax purposes, maintaining the efficiency of a police force is capable of being a charitable purpose. The body's purposes must, however, be identified objectively from its constitution, activities and surrounding circumstances. Publicly beneficial results do not themselves establish a charitable purpose.

A police athletic association organised sports and pastimes for serving and former members of the Glasgow Police Force. Members' subscriptions and profits from annual public sports were used for those activities. The Special Commissioners found that the Association improved fitness, morale, recruitment, police efficiency and relations with the public, and held that it was established for charitable purposes only.

The First Division of the Court of Session upheld that determination. It treated English charity law as foreign law and the Commissioners' conclusion as a finding of fact which it could not reconsider. The Inland Revenue Commissioners appealed.

The House considered whether the Scottish courts were required to determine the legal question under English charity law and whether the Association's substantial provision of recreation for its members prevented the statutory exemption.

1. Appeal allowed by a majority of four to one. Lord Normand, Lord Morton of Henryton, Lord Reid and Lord Cohen held that the Association was not established for charitable purposes only. Lord Oaksey dissented on the merits.

2. Per Lord Normand, with Lord Morton, Lord Reid and Lord Cohen reaching the same conclusion, increasing or maintaining the efficiency of a police force and thereby preserving public order is capable of being a public charitable purpose. It is analogous to the accepted charitable purpose of promoting the efficiency of the armed forces.

3. Per Lord Normand, the statutory requirement is not satisfied where an association has a charitable purpose and a non-charitable purpose which cannot be treated as incidental. The private recreation of members was an essential end in itself. It was not an unsought consequence of pursuing the public purpose.

4. Lord Reid held that a charitable purpose must be the predominant object and that non-charitable benefits to members must be subsidiary or incidental. Here the activities were designed in the first place to provide recreation and enjoyment. Those benefits bulked too largely in the Association's purposes and activities to be incidental.

5. Lord Morton and Lord Cohen emphasised the distinction between purposes and results. The constitution and operations disclosed a substantial purpose of providing sports and pastimes for members. Improved police efficiency and public benefit were consequences of successfully pursuing that purpose. They did not convert it into an exclusively charitable purpose.

6. Per Lord Normand, an association's purposes are identified objectively from its rules, activities and relationship with relevant institutions and the public. The rules are highly important, but admissible evidence may establish additional purposes. The inquiry does not turn upon the subjective motives of members or officials.

7. Lord Oaksey dissented. He regarded the Association's constitutional subordination to the Chief Constable as showing that its purpose was police efficiency, while members' enjoyment was merely a consequence of pursuing that charitable purpose.

8. All five Law Lords agreed that the First Division had erred in declining to decide the question of law. For income tax purposes, Parliament had made the English law of charity applicable in Scotland. The Court of Session therefore had a statutory duty to ascertain and administer that law rather than treat it as foreign law or accept the Commissioners' conclusion as conclusive fact.

1. House of Lords: By a majority of four to one, allowed the Inland Revenue Commissioners' appeal and held that the Association was not established for charitable purposes only.

2. First Division of the Court of Session: Answered the stated question in the Association's favour. It treated English charity law as foreign law and accepted the Special Commissioners' determination as a finding of fact.

3. Special Commissioners: Rejected the Crown's contention and determined that the Association was established for charitable purposes only, so that the annual sports profits qualified for exemption under section 30 of the Finance Act 1921, as amended.