This Appeal centred on what defines a company as an investment company for the purposes of claiming a management expense deduction for Corporation tax purposes. The expenditure in question was incurred by Dawsongroup Ltd, in the delisting of its shares from the Stock Exchange. The relevant legislation s. 130 of the Income and Corporation Taxes Act 1988 states that “an investment company” means any company whose business consists wholly or mainly in the making of investments ”

As a definition of an investment company itself is not provided in the tax legislation, Colin Bishopp J looked at the general meaning of an investment company and the application of such a definition to facts of the case. The activities of the company included holding shares in its subsidiaries and providing facilities and head office functions for them. It charged its subsidiaries on an arms length basis for such services but did not charge the subsidiaries for the cost of delisting from the Stock Exchange. In addition, the company was also engaged in its own trading activities

The key point examined in arriving at a decision was whether the holding of shares by Dawsongroup Ltd in its subsidiaries could be regarded as a stand alone investment business activity rather than a structure incidental to the carrying on of a trading business activity. It was found that the company was a trading company which held shares in its subsidiaries as the means by which it controlled its assets rather than as an investment.

The judge also went on to examine if the expenses incurred were management expenses. In arriving at this decision, it was stated that there should be an identifiable relationship between the expenditure and the investment business. It was found that the expenditure incurred did not affect the trade or investment activity of the company and therefore could not be said to be expenditure incurred in the course of managing investments.