HM Inspector of Taxes v Dextra Accessories Ltd & Ors

For the purposes of section 43 of the Finance Act 1989, the phrase with a view to cannot be replaced by a sole-purpose or principal-or-dominant-purpose test. It has a flexible, context-sensitive meaning. In the case of a genuine discretionary employee benefit trust, the question is determined primarily by the terms on which the funds are held. The phrase may embrace the whole range of realistic future applications permitted by the trust, including applications that may not produce emoluments. The possibility of non-emolument benefits therefore does not prevent the funds from being potential emoluments. The appeal was allowed, with costs here and below.

Six companies in the Caudwell Group paid substantial sums into an employee benefit trust in December 1998 and claimed corporation tax deductions. The Inspector treated the sums as potential emoluments under section 43(11)(a) of the Finance Act 1989, so that the deductions would be postponed. The Special Commissioners allowed the companies’ appeals. Neuberger J dismissed the Revenue’s appeal, giving the statutory phrase a different construction; his judgment is reported at [2003] STC 749. The Court of Appeal considered whether funds held by an independent trustee under a genuine discretionary settlement were held with a view to becoming relevant emoluments, and whether a principal or dominant intention was required.

Lord Justice Jonathan Parker delivered the principal judgment. Mr Justice Charles agreed, while emphasising that the purposive arguments were evenly balanced and that no generally applicable threshold should be imposed. Lord Justice Potter agreed.

1. Disposition. The Revenue’s appeal was allowed. The order below was set aside, with costs here and below. Permission to appeal was refused.
2. Statutory construction. Section 43 of the Finance Act 1989 postpones an employer’s deduction for relevant emoluments until payment, subject to the nine-month period of grace. Section 43(11)(a) extends the regime to potential emoluments. The phrase with a view to is flexible and context-sensitive. It connotes some element of purpose, intention or contemplation, but, when coupled with potential emoluments, concerns a future event which may or may not occur. A sole-purpose or principal-or-dominant-intention gloss was therefore rejected.
3. Intermediaries. The relevant view depends on the way the funds are held. For a mere agent or bare trustee, the employer’s view may be decisive. For a genuine discretionary settlement, the primary consideration is the trust instrument and the terms governing the funds. The trustee’s future purposes are not relevant merely because it may later exercise its discretion. Subsequent dealings matter only if they effectively alter those terms.
4. Application. The EBT permitted the trustee to make a realistic range of applications, including applications which would not produce emoluments. That possibility did not take the contributions outside section 43(11)(a); the phrase embraced the whole realistic range of outcomes. The Court derived no significant assistance from the authorities on the similar phrase in section 44(1) of the Bankruptcy Act 1914, because the statutory contexts differed and section 43 looked to future transactions. Hansard was unnecessary because section 43(11)(a) was not sufficiently ambiguous.

• Court of Appeal (Civil Division) allowed the Revenue’s appeal from the High Court and ordered costs here and below.
• High Court, Chancery Division Neuberger J dismissed the Revenue’s appeal from the Special Commissioners on 15 April 2003; the judgment is reported at [2003] STC 749.
• Special Commissioners allowed the companies’ appeals, holding that the contributions were not potential emoluments and rejecting the Revenue’s alternative arguments.