Taxes are imposed upon subjects by Parliament. A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined. A proposition that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body represents a radical departure from constitutional principle. It may be that the revenue could persuade Parliament to enact such a proposition in such terms that the courts would have to give effect to it: but, unless it has done so, the courts, acting on constitutional principles, not only should not, but cannot, validate it. When Parliament imposes a tax, it is the duty of the commissioners to assess and levy it upon and from those who are liable by law. Of course they may, indeed should, act with administrative commonsense. To expend a large amount of taxpayer’s money in collecting, or attempting to collect, small sums would be an exercise in futility: and no one is going to complain if they bring humanity to bear in hard cases. I accept also that they cannot, in the absence of clear power, tax any given income more than once. But all of this falls far short of saying that so long as they do not exceed a maximum they can decide that beneficiary A is to bear so much tax and no more, or that beneficiary B is to bear no tax. This would be taxation by self-asserted administrative discretion and not by law. The fact in the present case is that Parliament has laid down no basis on which tax can be apportioned where there are numerous discretionary beneficiaries. The Commissioners had no power to mitigate the gross injustice that would result from the strict application of the section, as interpreted by them. The devices resorted to by the Commissioners were unconstitutional.
HL Income tax – Avoidance of tax – Transfer of assets – Income payable to trustees of settlement resident abroad – Income accumulated and invested – Income from such investments also accumulated and invested in two funds – Investments including shares in wholly-owned overseas companies – Capital sums paid out of each fund to discretionary beneficiaries (other than the transferors) ordinarily resident in the U.K. – Capital sum paid to mother of infant beneficiary – Whether infant ‘received’ or ‘entitled to receive’ such capital sum – Whether each of such beneficiaries had ‘power to enjoy’ income of (a) the trustees, (b) the overseas companies – Whether such income deemed to be income of each of such beneficiaries in years prior to, including, and subsequent to, year of receipt – Power of Board of Inland Revenue to apportion such income between selected beneficiaries – Income Tax Act 1952, s 412 (1), (2), (4), (5) and (6) – Finance Act 1969, s 33 – Inland Revenue Regulation Act 1890, s 1 – Taxes Management Act 1970, s 1.
Lord Wilberforce, Lord Dilhorne, Lord Salmon, Lord Edmund-Davies, Lord Edmund-Davies
[1980] AC 1148, (1979) 54 Tax Cas 503, [1979] 3 WLR 915, [1979] UKHL TC – 54 – 503
Bailii
Taxes Management Act 1970 1, Inland Revenue Regulation Act 1890 1, Finance Act 1969 33, Income Tax Act 1952 412(1)
England and Wales
Citing:
Cited – Absolom v Talbot 1943
Scott LJ said: ‘No judicial countenance can or ought to be given in matters of taxation to any system of extra-legal concessions.’ . .
Appeal from – Vestey v Inland Revenue Commissioners (No 2) ChD 1979
The Commissioners of Inland Revenue do not have, any more than does any other emanation of the Crown, any power to suspend or dispense with laws. ‘It is at this point that there arises what Mr Potter, for the taxpayers, has denominated as a serious . .
Appeal from – Vestey v Inland Revenue Commissioners ChD 1979
The case concerned section 478, which had monstrous and unintended results, if applied in accordance with its natural meaning. The Commissioners did not seek to apply the section in a manner which produced such results. The court held: ‘One should . .
Cited – Practice Statement (Judicial Precedent) HL 1966
The House gave guidance how it would treat an invitation to depart from a previous decision of the House. Such a course was possible, but the direction was not an ‘open sesame’ for a differently constituted committee to prefer their views to those . .
Cited by:
Cited – Scottish Widows Plc v Revenue and Customs SC 6-Jul-2011
The taxpayer insurance company had transferred sums from accounts designated as Capital Reserves. The Revenue said that these were properly part of the profit and loss accounts for the respective tax years, and chargeable receipts.
Held: The . .
Cited – Project Blue Ltd v Revenue and Customs SC 13-Jun-2018
The purchaser of land created a sub-sale and leaseback with bank so as to fund the purchase in a manner which would comply with Islamic finance principles. The Court was now asked whether purchaser or the bank were liable for stamp duty land tax on . .
Lists of cited by and citing cases may be incomplete.
Updated: 28 July 2021; Ref: scu.184331
