Gascoines Group Ltd & Ors v HM Inspector of Taxes

For small companies relief, associated-company status depends on applying the statutory control provisions. The legislation extends beyond factual or actual control: rights and powers may be attributed to a person even where that person has little or no practical control. Companies may also be treated as under the control of the same person, including where control is attributed through associates or trustees of a settlement. The court examines the candidate company’s relationship with potential associated companies; relationships between other companies are irrelevant. A provisional view formed by a tribunal member before or at the hearing does not establish apparent bias if the member retains an open mind.

Three taxpayer companies appealed from a decision in principle of the Special Commissioners. The Commissioners held that Saracens Securities Ltd was associated with both Gascoines Group Ltd and Newark Cattle Market Company Ltd for the purposes of small companies relief under section 13 of the Income and Corporation Taxes Act 1988.

The appeal concerned the statutory meaning of control, the relevance of attributed control, and an allegation that the Special Commissioners had failed to provide a fair hearing or were biased. The companies also argued that control for these purposes could rest only with one person.

1. Appeal dismissed. The Special Commissioners were correct to conclude that Saracens was an associated company of Gascoines and Newark.
2. Under section 13(4) of the Income and Corporation Taxes Act 1988, companies are associated where one controls the other or both are under the control of the same person or persons. The court must examine the relationship between the company claiming relief and its potential associated companies.
3. The statutory concept of control includes attributed control under section 416. It is not limited to factual or actual control. Following the approach explained in R v Inland Revenue Commissioners, ex parte Newfields Development Ltd [2001] 1 WLR 1111, the statutory definitions deliberately cast the net widely.
4. Mr D W H Gascoine controlled Gascoines through his majority shareholding. He controlled Newark through Gascoines, both because he could exercise indirect control and because Gascoines’ rights and powers could be attributed to him. He also controlled Saracens because the trustees holding 99 per cent of its shares were associates of him as settlor of the relevant settlement, so their rights could be attributed to him.
5. The argument that actual control was required was rejected. Steele v EVC International [1996] STC 785, concerning section 839, was not apposite. The argument that control could rest only with one person was also rejected; the Act permits attribution even where control by others exists or could also be attributed.
6. The bias challenge failed. There was no material failure by the Commissioners to address the arguments, the earlier professional connection disclosed by one Commissioner created no real risk of bias, and the allegation of a secret agenda had no evidential foundation. A provisional view is unobjectionable where the decision-maker retains an open mind, applying Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437 at 1440, para 9.

The appeal was brought to the High Court from a decision in principle of the Special Commissioners, handed down on 21 July 2003. The High Court dismissed the appeal.