Noved Investment Company v Her Majesty's Revenue & Customs

Facts

Noved Investment Company, incorporated with limited liability in 1919 by two members of the Foyle family to sell books, was later re-registered as an unlimited company with a share capital and, following the transfer of the bookselling business to another company in 1969, became an investment company. Its shares devolved upon members of the Foyle family, including Mrs Christina Batty, formerly Miss Christina Foyle, who at her death on 8 June 1999 held 7,213 of the 12,007 issued £1 shares — about 60 per cent. She left her residuary estate, including those shares, on general charitable trusts, and her executors gave effect to the bequest by establishing the Foyle Foundation, registered as a charity on 28 July 2000. On 14 December 2000 the executors, the other shareholders, the Foundation and the company entered into a shareholders' agreement partitioning the company's shares and assets: the shares transferred to the Foundation became A shares interested in 60 per cent of the assets, the remainder became B shares, and the articles were amended so that the A shareholder could by ordinary resolution require the company to make gifts of the A assets to any charity. The Foundation duly resolved that the company make gifts to it, including £9M in cash, and a further £2,884,740 was paid on 1 May 2001. The company deducted the payments as charges on income; the Revenue disallowed them and adjusted its returns for the periods ending 31 December 2000 and 31 December 2001.