“Whilst we can conclude that, through WDMSP Ltd, Eclipse 5 35 monitored the activities of the Distributor with regard to the marketing and release of the Films, and was kept fully aware of the activities in that regard which the Distributor undertook and of the financial performance of the Films, we are unable to conclude that Eclipse 35 had a part, or at least a meaningful part, in 10 directing and supervising the marketing and release of the Films by the Distributor.”
“609 Charge to tax on films and sound recordings businesses (1) Income tax is charged on income from a business involving the 20 exploitation of films or sound recordings where the activities carried on do not amount to a trade. Such a business is referred to in this Chapter as a “non-trade business”. …”
“Whether a given transaction or series of transactions is in the nature of trade is a question of fact for the commissioners [now, the FTT]. An appeal from 35 their decision can succeed only if they have misdirected themselves in law or if the only true and reasonable conclusion from the facts found by them is contrary to their determination.”
“5. The question is whether in aid of the interpretation of a statute the court may take into account the Explanatory Notes and, if so, to what extent. The 10 starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used. It follows that the context must always be identified and considered before the process of construction or during it. It is therefore wrong to say that the court may only resort to evidence of the contextual scene when an ambiguity has arisen. In regard to contractual 15 interpretation this was made clear by Lord Wilberforce in Prenn v Simmonds[1971] 1 WLR 1381 , 1384-1386, and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen[1976] 1 WLR 989 , 995-996. Moreover, in his important judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society[1998] 1 WLR 896 , 912-913, Lord Hoffmann made crystal clear that 20 an ambiguity need not be established before the surrounding circumstances may be taken into account. The same applies to statutory construction. In River Wear Commissioners v Adamson(1877) 2 App Cas 743 , 763, Lord Blackburn explained the position as follows: "I shall . . . state, as precisely as I can, what I understand from the 25 decided cases to be the principles on which the courts of law act in construing instruments in writing; and a statute is an instrument in writing. In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring farther, and 30 seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they were used." 35 Again, there is no need to establish an ambiguity before taking into account the objective circumstances to which the language relates. Applied to the subject under consideration the result is as follows. Insofar as the Explanatory Notes cast light on the objective setting or contextual scene of the statute, and the mischief at which it is aimed, such materials are therefore always 40 admissible aids to construction. They may be admitted for what logical value they have. Used for this purpose Explanatory Notes will sometimes be more informative and valuable than reports of the Law Commission or advisory committees, Government green or white papers, and the like. After all, the connection of Explanatory Notes with the shape of the proposed legislation is 45 closer than pre-parliamentary aids which in principle are already treated as admissible: see Cross, Statutory Interpretation, 3rd ed (1995), pp 160-161. If 36 used for this purpose the recent reservations in dicta in the House of Lords about the use of Hansard materials in aid of construction are not engaged: see R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd[2001] 2 AC 349 , 407; Robinson v Secretary of State for Northern Ireland[2002] UKHL 32 , The Times, 26 July 5 2002, in particular per Lord Hoffmann, at paragraph 40. On this basis the constitutional arguments which I put forward extra-judicially are also not engaged: "Pepper v Hart: A Re-examination" (2001) 21 Oxford Journal of Legal Studies 59.” 10 93. Perhaps one needs to approach these dicta with a little caution, since none of the other members of the Appellate Committee referred to them or endorsed them. However, for the purposes of the argument in this case I proceed on the footing that they contain a correct statement of the law. 15 94. Section 18 ICTA provides as follows: “18.-Schedule D. (1) The Schedule referred to as Schedule D is as follows:- SCHEDULE D 20 Tax under this Schedule shall be charged in respect of – (a) the annual profits or gains arising or accruing – (i) to any person residing in the United Kingdom from any kind of property whatever, whether situated in the United Kingdom or elsewhere, and 25 (ii) to any person residing in the United Kingdom from any trade, profession or vocation, whether carried on in the United Kingdom or elsewhere, and (iii)to any person, whether a Commonwealth citizen or not, although not resident in the United Kingdom from any property 30 whatever in the United Kingdom or from any trade, profession or vocation exercised within the United Kingdom, and (b) all interest of money, annuities and other annual profits or gains not charged under [not charged under [Schedule A or under ITEPA 2003 as employment income, pension income or social security 35 income]], and not specially exempted from tax. (2) Tax under Schedule D shall be charged under the Cases set out in subsection (3) below, and subject to and in accordance with the provisions of the Tax Acts applicable to those Cases respectively. 37 (3) The Cases are – Case I: tax in respect of any trade carried on in the United Kingdom or elsewhere [but not contained in Schedule A] … Case VI: tax in respect of any annual profits or gains not falling under any other Case of Schedule D and 5 not charged by virtue of [Schedule A or by virtue of ITEPA 2001 as employment income, pension income or social security income.] …”
“‘The purpose of a contract, agreement or arrangement must be what it is intended to effect and that intention must be ascertained from its terms.’”
“It is manifest that some transactions may be so affected or inspired by 20 fiscal considerations that the shape and character of the transaction is no longer that of a trading transaction. The result will be not that a trading transaction with unusual features is revealed but that there is an arrangement or scheme which cannot fairly be regarded as being a transaction [in the nature of trade].” 25 In my judgment this is the true significance of a fiscal motive. Fiscal considerations naturally affect the taxpayer's evaluation of the financial risks and rewards of any proposed venture, and are often the decisive factor in persuading him to enter into it. First-year allowances, enterprise zones, 30 government grants and the like operate as financial inducements to businessmen to engage in commercial activities which would be financially unattractive or unacceptably speculative without them. Such motivations, even if paramount, do not alter the character of the activities in question. But while a fiscal motive, even an overriding fiscal motive, is irrelevant in itself, it 35 becomes highly relevant if it affects, not just the shape or structure of the transaction, but its commerciality so that, in the words of Lord Morris of Borth-y-Gest “the shape and character of the transaction is no longer that of a trading transaction.”
“If I apply what I regard as the accepted test to the facts found in the present case, I am bound to say, with all respect to the judgments under appeal, that I 10 can see only one true and reasonable conclusion. The profit from the set of operations that comprised the purchase and sales of the spinning plant was the profit of an adventure in the nature of trade. What other word is apt to describe the operations? Here are two gentlemen who put their money, or the money of one of them, into buying a 15 lot of machinery. They have no intention of using it as machinery, so they do not buy it to hold as an income-producing asset. They do not buy it to consume or for the pleasure of enjoyment. On the contrary, they have no intention of holding their purchase at all. They are planning to sell the machinery even before they have bought it. and in due course they do sell it, in 20 five separate lots, as events turned out. And, as they hoped and expected they make a net profit on the deal, after charging all expenses such as repairs and replacements, commissions, wages, travelling and entertainment and incidentals, which do in fact represent the cost of organizing the venture and carrying it through. 25 This seems to be, inescapably, a commercial deal in secondhand plant. …”