Listowel Race Company Ltd v Revenue Commissioners
| Jurisdiction | Ireland |
| Judge | Ms. Justice Baker |
| Judgment Date | 22 April 2022 |
| Neutral Citation | [2022] IEHC 253 |
| Court | High Court |
| Docket Number | Record No. 2021/7R |
[2022] IEHC 253
Record No. 2021/7R
THE HIGH COURT
Statutory exemption – Tax – Sporting bodies – Appellant appealing from the decision of the Tax Appeal Commissioner that the appellant be refused the statutory exemption from corporation or income tax afforded to sporting bodies in respect of some or all of their income – Whether the Tax Appeal Commissioner was correct in determining that the appellant does not exist for the sole purpose of promoting athletic games or sports
Facts: The appellant, Listowel Race Company Ltd, appealed pursuant to s. 949 of the Taxes Consolidation Act 1997 (the TCA) from the decision of the Tax Appeal Commissioner that the appellant be refused the statutory exemption from corporation or income tax afforded to sporting bodies in respect of some or all of their income. On 18 February 2021, the Commissioner, at the request of the appellant, stated a case for the opinion of the High Court on the five questions proposed by the appellant in its notice dated 30 November 2020: (1) whether the Commissioner was correct in determining that the appellant does not exist for the sole purpose of promoting athletic games or sports; (2) whether the Commissioner was obliged to, firstly, determine the correct legal interpretation of the expression “athletic or amateur games or sports”, and then, secondly, to apply the legal interpretation to the factual situation; (3) whether s. 235 of the TCA is confined to amateur sports only, to the exclusion of professional sports; (4) if the answer to Question 3 is “no”, whether horse racing is a “sport”; (5) if the answer to Question 4 is in the affirmative, whether horse racing is an “athletic” sport. The appellant submitted that the Commissioner erred in determining that the appellant was not established for the “sole purpose of athletic or amateur games and sports” as it was wrong to determine that Horse Racing Ireland’s involvement, and the manner by which the appellant derived its income, was determinative of its purpose. It submitted that the findings of fact that led him to such a conclusion were not based on the evidence. The respondent, the Revenue Commissioners, submitted that the Commissioner was correct to have regard to the source of the appellant’s income and that his findings were based on the evidence.
Held by Baker J that the Commissioner’s conclusion that the appellant company did not exist for the sole purpose of promoting athletic games or sports was based on an inadequate and incorrect analysis of the gateway provisions in s. 235(2). Baker J held that the conclusions the Commissioner drew from the primary facts arose from a mistake in reasoning regarding the relationship between the regulatory body and the body it regulated, and that he misdirected himself in law in failing to have any consideration to what the promotion of a particular activity might entail. Because of the view Baker J took as to the Commissioner’s approach to the evidence, she did not think that the second question arose. Baker J held that the appellant was correct that the exemption was not to be restricted to bodies which promote only amateur sports. Baker J held that the Commissioner was wrong to take the view that horse racing is not a sport and if it is a sport it seemed to Baker J that it must be an athletic sport.
Baker J answered the questions raised in the case stated as follows: (1) no; (2) does not arise; (3) no; (4) yes; (5) yes.
Case stated.
JUDGMENT of Ms. Justice Baker delivered on the 22nd day of April, 2022
A statutory exemption from corporation or income tax is afforded to sporting bodies in respect of some or all of their income, I shall refer to this tax exemption as the sporting exemption in this judgment for convenience. The sporting exemption is undoubtedly of great financial and even community benefit and was first introduced with the aim of fostering national games at the foundation of the State, at a time when those games benefitting from the exemption were operating on a smaller scale than those now operating and earning income in the State. Sport has undoubtedly changed a great deal in many respects in the intervening period, sport is now a profession for some, a business for others, yet remains a purely recreational activity for a great number more. This judgment touches on many of those fundamental ideas about what sport is, but more precisely whether a particular sporting activity falls within the meaning of the legislation that allows for the statutory exemption.
This judgment is given in a case stated by the Tax Appeal Commissioner (“the Commissioner”) at the request of the Listowel Race Company Ltd (“the appellant”) on account of his decision that it be refused the sporting exemption.
The sporting exemption has a long history rooted, it would seem, in a desire at the foundation of the State to support and foster national games and sport. Section 8 of the Finance Act 1927 (“the Act of 1927”) granted specific exemption from tax of the income of bodies established to promote the games of “Gaelic football, hurling and handball”:
“Exemption shall be granted from tax under Schedule D of the Income Tax Act, 1918, in respect of so much of the income of any body of persons established for the purpose of promoting the games of Gaelic football, hurling, and handball or any of them as the Revenue Commissioners are satisfied has been or will be applied to such purpose.”
Following a submission by sporting groups to the then Commission on Income Taxation in 1959 regarding an extension of this exemption, the Commission recommended an extension of the Act of 1927 and “that the income of all amateur sports bodies which is directly applied to promote sports activities should be exempt from income taxation, so far as not already exempted.” This led to the introduction of relief for a broader range of sports or games by s. 2 of the Finance Act 1963:
“Exemption shall be granted from income tax in respect of so much of the income of any body of persons established for the sole purpose of promoting athletic or amateur games or sports as is shown to the satisfaction of the Revenue Commissioners to be income which has been or will be applied to that purpose.”
The recommendation that the qualifying body be one that promotes amateur sport only was not reflected in the language of the section which used the less clear phrase at the centre of this case stated: “athletic or amateur games or sport”.
The current exempting provisions are in somewhat different terms, but do contain the same phrase, enacted by s. 9 of the Finance Act 1984 and repeated in s. 235 of the Taxes Consolidation Act 1997 (“the TCA”), s. 235(2) of which provides:
“(2) Exemption from income tax or, as the case may be, corporation tax shall be granted in respect of so much of the income of any approved body of persons as is shown to the satisfaction of the Revenue Commissioners to be income which has been or will be applied to the sole purpose specified in subsection (1)(a).”
Section 235(1)(a) of the TCA defines for the purpose of that section an “approved body of persons” as
(a) any body of persons established for and existing for the sole purpose of promoting athletic or amateur games or sports, and […]”
Section 235(1)(b)(ii) provides that the “approved body of persons” does not include
“(b) […]
any such body of persons to which the Revenue Commissioners, after such consultation (if any) as may seem to them to be necessary with such person or body of persons as in their opinion may be of assistance to them, give a notice in writing stating that they are satisfied that the body—
(I) was established for not the sole purpose specified in paragraph (a) or was established wholly or partly for the purpose of securing a tax advantage, or
(II) being established for the sole purpose specified in paragraph (a), no longer exists for such purpose or commences to exist wholly or partly for the purpose of securing a tax advantage.”
The appellant provides facilities for horse racing at premises in Listowel, County Kerry. Part of its property is owned, and part held under a long lease, and comprises a racetrack and infrastructure such as stands, parade ring, restaurants and bars etc. The town of Listowel has had a long association with horse racing going back to the mid-nineteenth century, and the appellant, following its incorporation in 1949, took over the organising of races from a local committee. The appellant runs flat and national hunt racing at the “Listowel Races” each year in June and September, events which are run over several days and can attract crowds of up to 30,000 on a single day. The company's income derives from admission tickets, the sale of media rights, concessionaire receipts (food and drink), race card sale, and race sponsorship by local businesses and others.
The memorandum of association of the appellant shows that its primary objective “is to promote and organise horse racing for viewing by the public at Listowel Race Course, Listowel, County Kerry”. Certain powers are identified for the “exclusive furtherance” of that primary objective, including at 3(b) of the memorandum, the power to promote the interests of agriculture in all its branches including horse breeding and livestock breeding and for that purpose to hold races, shows, contests and exhibitions of all kinds. It also has as a purpose of its primary objects the power to promote the interests of the inhabitants of Listowel and its surrounding county and for that purpose to promote and encourage “open air sports and games of all kinds” and to hold and carry on “games and sports meetings and to provide accommodation for such purpose”. It has the usual power to acquire...
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