A clerk to the commissioners, though required to maintain an office for his post, could not set off the costs against tax, where the cost of interest payments on a mortgage to purchase the office were not wholly and exclusively incurred for that purpose.
Times 25-May-1999, Gazette 03-Jun-1999
Income and Corporation Taxes Act 1988 198(1)
Updated: 18 May 2022; Ref: scu.78087
[1925] UKHL TC – 9 – 234
Northern Ireland
Updated: 18 May 2022; Ref: scu.633841
[1927] UKHL TC – 11 – 446, 11 TC 446
England and Wales
Updated: 18 May 2022; Ref: scu.634144
A professional rugby player bought and consumed dietary supplements to make it easier to maintain the physical standards required by his employers. He claimed the cost of the supplements against his income tax. The commissioners allowed his claim, and the revenue appealed.
Held: The commissioners had erred. The requirements for the deduction were stringent, exacting and rigid. The expense had not been incurred in the performance of the duties. His duties had not obliged him to incur the expense. The supplements had been incurred in order to put him into a position where he could perform his duties. That was not enough.
Lightman J
Times 20-Jun-2001, Gazette 09-Aug-2001
Income and Corporation Taxes Act 1988 Sch E
Updated: 17 May 2022; Ref: scu.77805
[1991] 2 All ER 824
England and Wales
Appeal from – Pepper (Inspector of Taxes) v Hart HL 26-Nov-1992
Reference to Parliamentary Papers behind Statute
The inspector sought to tax the benefits in kind received by teachers at a private school in having their children educated at the school for free. Having agreed this was a taxable emolument, it was argued as to whether the taxable benefit was the . .
Lists of cited by and citing cases may be incomplete.
Updated: 16 May 2022; Ref: scu.200597
The taxpayer was a goalkeeper employed by Nottingham Forest Football Club. On his transfer to Southampton, he was paid pounds 75,000. The revenue appealed a finding that this was not taxable under Schedule E.
Held: To be taxcable it had to be referrable to the services provided by him under the contract of employment. This payment was made purely to persuade him to move employments, and was not therefore part of his emoluments at the new club. The payment was made in respect of his services at Nottingham, but was made by a third party.
[1990] 1 WLR 373, [1990] STC 55
Income and Corporation Taxes Act 1988 181
England and Wales
Distinguished – Hamblett v Godfrey (Inspector of Taxes) CA 2-Jan-1986
Affirmed. A single one off lump sum payment was found to be an emolument without consideration as to whether or not it was a capital payment. Miss Hamblett ‘received her payment as a recognition of the fact that she had lost certain rights as an . .
Considered – Pritchard (Inspector of Taxes) v Arundale ChD 1971
Megarry J discussed whether tips receieved were part taxable as an emolument: ‘I think the question to be tested in this way is only one question. Either the emoluments are within the statutory word ‘therefrom’, as explained by the cases, or they . .
Appeal from – Shilton v Wilmshurst HL 7-Feb-1991
The taxpayer was transferred from one football club to another. He was paid andpound;75,000 to persuade him to move. The revenue appealed a decision that this was not a sum taxable as an emolument under Schedule E by the new employer.
Held: . .
Lists of cited by and citing cases may be incomplete.
Updated: 16 May 2022; Ref: scu.199541
Income Tax, Schedule D-Resident in the United Kingdom employed out of the United Kingdom – Foreign possessions – Income Tax Act, 1918 (8 and 9 Geo. V, c. 40), Schedule D, Case V.
[1925] UKHL TC – 9 – 261, [1925] AC 458, 9 TC 261
England and Wales
Updated: 16 May 2022; Ref: scu.633842
Income Tax, Schedule D-Profits of trade-Deduction- Contribution to mutual insurance association-Mutual trading.
[1927] UKHL TC – 11 – 790
England and Wales
Updated: 16 May 2022; Ref: scu.634150
Income Tax, Schedule D – Profits of trade – Deduction – Income Tax Act, 1842 (5 and 6 Viet., c. 35), Section 100, Schedule D, Case I, Rule 3, and Cases I and II, Rule 1, and Section 159.
[1925] UKHL TC – 10 – 155, 10 TC 155
England and Wales
Updated: 16 May 2022; Ref: scu.633849
Income Tax, Schedule E-Deduction-Expenses-Income Tax Act, 1918 (8 and 9 Geo. V, c 40), Schedule E, Rule 9.
[1925] UKHL TC – 10 – 118
England and Wales
Updated: 16 May 2022; Ref: scu.633847
INCOME TAX – penalty for failure to make returns – whether reasonable excuse – no
[2018] UKFTT 586 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.632354
Lord Sterndale MR said: ‘It seems to me to be a general principle of Income Tax Law that a person in order to be taxable in a particular year must have an income arising from a source existing in that year and in order to justify this assessment the Crown must show some reason for departing from that general principle. It is admitted that if the taxation be in respect of a trade, or business, or an office, or of property the taxpayer must continue in the year of charge to carry on the trade or business or hold the office or the property. It was, however, contended for the Crown that the principle did not apply in this case because by the first rule of the Third Case the duty to be charged was computed according to the profits of the preceding year, and, therefore, if the last year was not taxed because there was no source, one year escaped taxation altogether. I do not think the first rule has this effect. The provision as to computation of profits is the same as that in respect of trades, etc., in the first rule of the First Case, and it is admitted that in that instance the trade must exist in the taxable year in order to make the taxpayer liable. I see no reason for construing the same provision in a different way in the two rules; both refer to methods of computation only, and are not directed to whether there is a taxable income or not. Besides, as pointed out in Dowell’s Income Tax Laws, 7th Edition, page 300, the Third Case originally dealt with property which must have existed in the hands of the taxpayer in the taxable year in order to make him liable, and it can hardly have been intended by the insertion of the second rule to alter the effect of the first. if the first year does escape taxation, it is because the Legislature has not inserted in the second rule of the Third Case such a provision as is found in the first rule of the First Case. It is suggested by the Commissioners that the profits of the first year might be taxed under the Sixth Case. I do not think it necessary to decide that point, for even if they be not taxable it does not in my opinion show that the taxpayer can be taxed in respect of a source of income which does not exist.’
Lord Sterndale MR
[1920] 3 KB 35
England and Wales
Appeal from – The National Provident Institution v Brown (Surveyor of Taxes) HL 3-Jun-1921
The House was asked (inter alia) whether discounts on certain Treasury Bills could be subject to taxation, on a preceding year basis, for a year in which the taxpayer did not hold or have any transactions in the relevant securities.
Held: The . .
Lists of cited by and citing cases may be incomplete.
Updated: 16 May 2022; Ref: scu.606460
FTTTX INCOME TAX – PAYE – penalties under Schedule 56, Finance Act 2009 – whether no liability for such penalties because – (1) the relevant late payments of PAYE were made during the currency of an agreement for deferred payment (para. 10, Sch 56, FA 2009) – found on the facts that 4 out of 6 of them were – or (2) because there should be a reduction to take account of special circumstances (para. 9 Sch 56 FA 2009) – held that the Tribunal would make no such reduction in relation to the remaining 2 penalties – or (3) because there was a reasonable excuse for the failure to make the relevant payments of PAYE on time (para 16 Sch 56 FA 2009) – found on the facts in relation to the remaining 2 penalties that no such reasonable excuse had been established – appeal allowed in part
[2013] UKFTT 753 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.519643
FTTTx INCOME TAX – ASSESSMENT AND PENALTY – HMRC treated a series of deposits in the Appellant’s bank accounts as taxable income – the Appellant’s explanations of the sources for the deposits were on the whole unconvincing – assessment reduced to andpound;24,924.98 – penalty reduced to andpound;11,216.23 – Appeal allowed in part.
[2013] UKFTT 487 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.515559
FTTTx Income Tax – trading in mobile phones as agent and on own account – whether activities single trade or separate trades – single trade – whether single trade ceased in tax year 2006-07 – no
[2013] UKFTT 465 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.515558
FTTTx PAYE and NI. End of year filing. Reasonable excuse. Honest belief as reasonable xcuse. R v Unah [2011] EWCA Crim 1837; [2012] 1 WLR 545 followed. Chichester v Commissioners of Revenue and Customs [2012] UKFTT 397 followed. Coales v Revenue and Customs Commissioners [2012] UKFTT 47 not followed.
Burden of proof.
[2013] UKFTT 717 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.519599
INCOME TAX – PAYE – Penalty for late payments- Whether reasonable excuse shown? – Not on the facts
[2013] UKFTT 748 (TC)
England and Wales
Updated: 16 May 2022; Ref: scu.519615
(1906) 5 TC 221
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 . .
Lists of cited by and citing cases may be incomplete.
Updated: 15 May 2022; Ref: scu.441622
Journalists can claim the costs of newspapers as expenses against his taxes.
Independent 16-Mar-1993
Income and Corporation Taxes Act 1988
England and Wales
Updated: 15 May 2022; Ref: scu.89320
Expenditure incurred by an employee directly mainly to keep himself qualified to do his work. Reading of newspapers is an necessary part of a journalist’s occupation and the cost of buying them is a deductible expense.
Gazette 22-Jan-1992
Income and Corporation Taxes Act 1988 s198 (1)
England and Wales
Updated: 15 May 2022; Ref: scu.89312
An allowance paid to a journalist by his employer to pay for newspapers he was to buy and read as part of his work was taxable under Sch E. It was not actually part of his job to read them.
Times 18-Feb-1994, Independent 18-Feb-1994
Income and Corporation Taxes Act 1970 189(1)
Scotland
Updated: 15 May 2022; Ref: scu.89315
Chattels which became affixed to a lessee’s land became fixtures, and were not available for tax allowances calculations. Lord Browne-Wilkinson said: ‘The terms expressly or implicitly agreed between the fixer of the chattel and the owner of the land cannot affect the determination of the question whether, in law, the chattel has become a fixture and therefore in law belongs to the owner of the soil . . The terms of such agreement will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as against certain third parties. But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed.’ and ‘the intention of the parties as to ownership of the chattel fixed to the land is only material so far as such intention can be presumed from the degree and object of the annexation.’
Lord Browne-Wilkinson
Gazette 08-Nov-1995, Times 16-Oct-1995, Ind Summary 06-Nov-1995, [1996] AC 454
Capital Allowances Act 1990 24(1) 53(1)
England and Wales
Appeal from – Melluish (Inspector of Taxes) v BMI (No 3) Ltd and Related Appeals CA 17-Aug-1994
Capital allowances were not available on plant which had been leased to the Local Authority and which had since had become part of land occupied by them. The plant was no longer owned by the tax payers. Leased fixtures given capital allowances by . .
Cited – Elitestone Ltd v Morris and Another HL 1-May-1997
The plaintiff acquired land on which 27 chalets were erected. They served notice to quit so that the site could be developed. The defendants argued that they had residential tenancies with protection under the Rent Act 1977.
Held: The tenants’ . .
Cited – Botham and others v TSB Bank Plc CA 30-Jul-1996
A flat had been repossessed by the bank. The parties disputed whether items were fixtures and charged with the land or not.
Held: The judge had correctly analysed and applied the law of fixtures and fittings. The appeal failed save to a . .
Cited – L, Regina (on the Application of) v Commissioner of Police for the Metropolis and Another CA 1-Mar-2007
The court considered the proper content of an enhanced criminal record certificate. The claimant said that it should contain only matter relating to actual or potential criminal activity.
Held: As to the meaning of section 115: ‘if Parliament . .
Lists of cited by and citing cases may be incomplete.
Updated: 15 May 2022; Ref: scu.83611
The taxpayer was not liable to income tax on a one off transaction which did not amount to an adventure in the nature of trade.
Gazette 24-Jul-1991, [1991] 1 WLR 863, Times 16-Jun-1991
England and Wales
Updated: 15 May 2022; Ref: scu.268826
A company had been formed to take over the taxpayer’s business. He held the shares equally with his wife. Later the company created a class of preference shares of andpound;200 each carrying a fixed preferential dividend, the right to vote if such dividend were in arrear for three years or more and the right in a winding up to a return of capital paid up. Some of the shares were taken up by his children on which they paid andpound;10 per share. Dividends substantially in excess of the amounts paid up were then declared and the taxpayer, on behalf of his children claimed repayment of the tax paid in respect of the dividend to the extent of that child’s personal allowance.
Held: The claim was rejected. Lawrence J said: ‘In my opinion, it is impossible to come to any other conclusion but that this was not a bona fide commercial transaction, and it appears to me that there was a disposition within the meaning of the definition or an arrangement in the nature of a disposition within [that meaning].’
Lawrence J
(1939) 22 TC 594
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Butler v Wildin 1988
Two brothers acquired a company and were the sole directors. 19 shares each were acquired by the children with their own money. Two later born children also acquired 19 shares therein with their own money from their respective fathers and others, . .
Applied – Young v Pearce 1996
The company created a special class of preference shares and allotted them to the wives of the two shareholders and directors. When substantial preference dividends were paid to the wives, the husbands were assessed to tax on them. They conceded . .
Cited – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Lists of cited by and citing cases may be incomplete.
Updated: 14 May 2022; Ref: scu.236560
Two brothers acquired a company and were the sole directors. 19 shares each were acquired by the children with their own money. Two later born children also acquired 19 shares therein with their own money from their respective fathers and others, and that the brothers had no shares. The company developed a site by building offices with the use of loans from a bank repayment of which was guaranteed by the brothers and let the offices. The company declared a dividend and the brothers, on behalf of their children, made repayment claims in relation to the tax credits attributable to those dividends. The claims were rejected on the grounds that there was a settlement in consequence of which the dividends were deemed to be the income of the brothers and not of their children. That was rejected by the Special Commissioners.
Held: The time at which the existence or otherwise of the settlement was to be judged was when the company was acquired and the shares allotted: ‘At that date a potentially profitable venture had been identified and, as will be seen, from that date the brothers did everything that needed to be done to ensure that the opportunity was exploited by the company.’ and ‘It is in my judgment plain beyond question that each brother was a party to an arrangement within the definition of a settlement and that the dividends paid to the four older children were paid to them ‘by virtue or in consequence of’ that arrangement. The brothers together arranged for shares in the company to be allotted to the four older children; and they arranged for the negotiations with British Rail to be opened, for the agreement with British Rail to be entered into and for the site to be developed by the company. The steps they took were thoughout directed to achieving the end that was in fact achieved, namely of ensuring that the company and so indirectly the four older children (to the extent of their respective shareholdings) took the benefit of the development of the site at no cost or risk to themselves.’ Referring to the case law: ‘In deciding whether an arrangement is within or without the classes of cases caught by s.437 the starting point must be to identify the arrangement. The question then is whether taken as a whole it did contain the requisite element of bounty. To that question again there can in the instant case be only one answer. The children contributed nothing except the trifling sums which I must assume were paid on the allotment of the shares. They were exposed to no risk.’
Vinelott J
(1988) 61 TC 666
Income and Corporation Taxes Act 1970 437
England and Wales
Cited – Copeman v Coleman 1939
A company had been formed to take over the taxpayer’s business. He held the shares equally with his wife. Later the company created a class of preference shares of andpound;200 each carrying a fixed preferential dividend, the right to vote if such . .
Cited – Chinn v Hochstrasser (Inspector of Taxes) HL 11-Dec-1980
The House considered the meaning of the word ‘bounty’ in an income tax context, where it had been used by the courts: ‘My Lords, I would venture to point out that the word ‘bounty’ appears nowhere in the statute. It is a judicial gloss upon the . .
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Cited – Jones v Garnett (Her Majesty’s Inspector of Taxes) HL 25-Jul-2007
The husband and wife had each owned a share in a company which sold the services of the husband. The Revenue claimed that the payment of dividends to the wife was a settlement.
Held: The Revenue failed. The share had been transferred to the . .
Lists of cited by and citing cases may be incomplete.
Updated: 14 May 2022; Ref: scu.236563
When a person who re-claims a tax credit avoids the general prohibition on new claims for tax credits; that prohibition being part of the scheme for implementing Universal Credit.
[2020] UKUT 239 (AAC)
England and Wales
Updated: 14 May 2022; Ref: scu.656574
(1906) 43 SLR 465
Cited – Ingram and Palmer-Tomkinson (Executors of the Estate of Lady Jane Lindsay Morgan Ingram Deceased) v Commissioners of Inland Revenue CA 28-Jul-1997
The deceased had first conveyed property to her solicitor. Leases back were then created in her favour, and then the freeholds were conveyed at her direction to her children and grandchildren. They were potentially exempt transfers.
Held: . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.223756
When a legatee of shares received them more than a year after the death, he was not treated as receiving all the accrued dividends as income of the year in which the shares became vested in him, but rather, by relation back to the death, in the year in which each dividend accrued.
[1928] 1 KB 578
Cited – Jemma Trust Company Ltd v Kippax Beaumont Lewis (A Firm) and others CA 11-Mar-2005
The defendant firm of solicitors, acting as executors had sought to arrange matters to minimise Inheritance Tax. A deed of variation was put in place after approval by the court, but the CTO interpreted the deed differently. The executors believed . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.223514
Affirmed. A single one off lump sum payment was found to be an emolument without consideration as to whether or not it was a capital payment. Miss Hamblett ‘received her payment as a recognition of the fact that she had lost certain rights as an employee, and by reason of the further fact that she had elected to remain in her employment at GCHQ.’
Neill LJ
[1987] 1 All ER 916, [1986] 59 TC 694
England and Wales
Appeal from – Hamblett v Godfrey (Inspector of Taxes) ChD 1986
A single one off lump sum payment was found to be an emolument without consideration as to whether or not it was of capital. . .
Distinguished – Shilton v Wilmshurst (Inspector of Taxes) CA 1990
The taxpayer was a goalkeeper employed by Nottingham Forest Football Club. On his transfer to Southampton, he was paid pounds 75,000. The revenue appealed a finding that this was not taxable under Schedule E.
Held: To be taxcable it had to be . .
Considered – Shilton v Wilmshurst HL 7-Feb-1991
The taxpayer was transferred from one football club to another. He was paid andpound;75,000 to persuade him to move. The revenue appealed a decision that this was not a sum taxable as an emolument under Schedule E by the new employer.
Held: . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.199544
A single one off lump sum payment was found to be an emolument without consideration as to whether or not it was of capital.
Neill LJ
[1986] 2 All ER 513, (1986) 59 TC 694
England and Wales
Appeal from – Hamblett v Godfrey (Inspector of Taxes) CA 2-Jan-1986
Affirmed. A single one off lump sum payment was found to be an emolument without consideration as to whether or not it was a capital payment. Miss Hamblett ‘received her payment as a recognition of the fact that she had lost certain rights as an . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.199543
(1945) TC 310, (1945) 173 LT 77
Cited – Newsom v Robertson ChD 30-Apr-1952
Mr Newsom, a practising barrister sought to set off against his income, the expenses of travelling between his home and his chambers in London. The Inspector appealed the decision of the commissioners that he could do so. The rule required that the . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.197029
A company, at the relevant time director controlled, made a payment to its managing director in consideration for his undertaking not to compete with the company within five years of the date when he would leave its service.
Held: The transaction was one involving a commercial basis to buy an asset of value to the company and should not be treated as a distribution for the benefit of the managing director.
Harman J
(1954) 35 TC 230
England and Wales
Cited – Beak v Robson HL 1942
The issue was whether a payment to an employee in return for a restrictive covenant escaped tax. The obligations flowing from the contract of service and the remuneration to be received by the Respondent in respect of that service were entirely . .
Cited – RCI Europe Ltd v Kate Woods (HM Inspector of Taxes) ChD 16-Dec-2003
The company made payments to a former director in return for a severance agreement which restricted his future business activities.
Held: Despite the fact that all payments were made only after his employment had been terminated, they remained . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.190493
All that is required for a severance payment to be taxable is that there is a ‘connection’ between the actual, prospective or past holding of the employment and the giving of the undertaking.
Oliver J
[1979] STC 644
England and Wales
Cited – Beak v Robson HL 1942
The issue was whether a payment to an employee in return for a restrictive covenant escaped tax. The obligations flowing from the contract of service and the remuneration to be received by the Respondent in respect of that service were entirely . .
Cited – RCI Europe Ltd v Kate Woods (HM Inspector of Taxes) ChD 16-Dec-2003
The company made payments to a former director in return for a severance agreement which restricted his future business activities.
Held: Despite the fact that all payments were made only after his employment had been terminated, they remained . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 May 2022; Ref: scu.190494
The taxpayer had acquired capital assets under a financing arrangement in which payments were spread over several tax periods. It was appropriate to treat those payments in according with normal accounting practice, rather than to seek to pull them into the one period.
Gazette 10-Mar-1993, Ind Summary 01-Mar-1993
England and Wales
Appeal from – Gallagher v Jones (Inspector of Taxes) Threlfall v Same CA 1-Jul-1993
Commercial Practice is to be followed in apportioning payments under a lease between different tax years. There is no requirement that expenditure must be charged to year it in which technically falls due, but tax accounts must not give a misleading . .
Lists of cited by and citing cases may be incomplete.
Updated: 11 May 2022; Ref: scu.89892
Income Tax, Schedule D-Non-resident company-Exercise of trade within the United Kingdom-Income Tax Act, 1853 (16 and 17 Viet., c. 34), Section 2, Schedule D-Finance (No. 2) Act, 1915 (5 and 6 Geo. V, c. 89), Section 31.
[1927] UKHL TC – 13 – 126
England and Wales
Updated: 11 May 2022; Ref: scu.634152
Income Tax, Schedule D-Repayment of Excess Profits Duty -Income Tax Act, 1918 (8 and 9 Geo. V, c. 40), Schedule D, Gases I and II, Rule 4 (1).
[1926] UKHL TC – 11 – 323
England and Wales
Updated: 11 May 2022; Ref: scu.633834
Super-tax – Total income – Debenture stock created and distributed to shareholders by limited company in satisfaction of bonus declared out of undivided profits – Finance (1909-10) Act, 1910 (10 Edw. VII, c. 8), Section 66.
[1926] UKHL TC – 10 – 302, [1925] 1 KB 451, 10 TC 302
England and Wales
Updated: 11 May 2022; Ref: scu.633832
Income Tax – Payments by Royal Commission on Awards to Inventors for user of patent-Deduction of tax – Income Tax Act, 1918 (8 and 9 Geo. V, c. 40), Rule 21 (1) of General Rules.
[1927] UKHL TC – 11 – 730
England and Wales
Updated: 11 May 2022; Ref: scu.634149
Income Tax/Corporation Tax : Penalty – INCOME TAX – penalty for failure to make returns – notices not received – wrong initial and partially incorrect postcode – whether reasonable excuse – no
[2018] UKFTT 705 (TC)
England and Wales
Updated: 11 May 2022; Ref: scu.632444
The share owners placed half of the issued shares in the company in trust for the taxpayer, in order to persuade him to continue his involvement in the family company as an active director. The trust provided that the income from the shares should be paid to him for ‘so long as he shall be engaged in the management of the co.’ In default the shares would pass to other family members. He sought to be taxed on the basis that the dividend income received through the trust was remuneration from his office or employment as managing director and was earned income. The taxpayer claimed entitlement to earned incoome relief, and the General Commissioners agreed with him.
Held: The revenue’s appeal failed. The test of whether the income from the entrusted shares constituted earned income was whether, in the hands of the recipient, it was income earned as a reward for his services. There was ample evidence that this was the case here.
[1965] 1 All ER 692, [1965] 1 WLR 508, 109 Sol Jo 177, 42 TaxCas 291, [1965] TR 9, 44 ATC 6
England and Wales
Cited – HM Revenue and Customs v PA Holdings Ltd CA 30-Nov-2011
The company made available to certain employees discretionary annual bonuses which were paid instead by way of shares and received dividends. It now appealed against findings that the payments were taxable subject to Schedule F rates and were liable . .
Cited – Morgan v Department for Employment and Learning NIIT 24-Jan-2014
. .
Lists of cited by and citing cases may be incomplete.
Updated: 11 May 2022; Ref: scu.601947
The House considered whether under the 1992 Regulations a self-employed parent could use for his child support calculation his net earnings as declared to the Revenue, which would allow deduction of capital and other allowances properly claimed against tax.
Held: The appeal was allowed, and the decision of the Child Support Commissioner restored (majority). The precise and unusual phrase used in the regulations matched that used in the tax return. Lord Carswell: ‘one is entitled to place less emphasis on the coincidence in wording and return to the exercise of attempting by the use of the several recognised methods of statutory interpretation to ascertain the true intention of Parliament.’
(dissenting opinion) Though there was an inconsistency, the regulations was clear and could not be read to bear the interpretation proposed by the Secretary of State.
Lord Nicholls of Birkenhead, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, Baroness Hale of Richmond, Lord Carswell
Times 14-Jul-2006, [2006] UKHL 35, [2006] 1 WLR 2024
Child Support (Maintenance Assessments and Special Cases) Regulations 1992, Child Support Act 1991
England and Wales
Cited – Elliss v BP Oil Northern Ireland Refinery Ltd CA 1987
The company had incurred capital expenditure in machinery and plant for trading before 1972. The 1975 Act prevented them claiming the expenditure as losses, and they sought to carry them forward to 1973 when additional claims were possible. The . .
Cited – Secretary of State for Work and Pensions v M HL 8-Mar-2006
The respondent’s child lived with the estranged father for most of each week. She was obliged to contribute child support. She now lived with a woman, and complained that because her relationship was homosexual, she had been asked to pay more than . .
Cited – Kehoe, Regina (on the Application of) v Secretary of State for Work and Pensions HL 14-Jul-2005
The applicant contended that the 1991 Act infringed her human rights in denying her access to court to obtain maintenance for her children.
Held: The applicant had no substantive right to take part in the enforcement process in domestic law . .
Cited – Marckx v Belgium ECHR 13-Jun-1979
Recognition of illegitimate children
The complaint related to the manner in which parents were required to adopt their own illegitimate child in order to increase his rights. Under Belgian law, no legal bond between an unmarried mother and her child results from the mere fact of birth. . .
Cited – Clift, Regina (on the Application of) v Secretary of State for the Home Department HL 13-Dec-2006
The claimants were former serving prisoners who complained that the early release provisions discriminated against them unjustifiably. Each was subject to a deportation requirement, and said that in their cases the control on the time for their . .
Cited – Alvi, Regina (on The Application of) v Secretary of State for The Home Department SC 18-Jul-2012
The claimant had entered as a student, and then stayed under a work permit. New rules were brought in, and because his occupation as a physiotherapy assistant was not listed, he was not credited with sufficient points for a permit. The Court of . .
Lists of cited by and citing cases may be incomplete.
Updated: 11 May 2022; Ref: scu.243083
Loans made between associated companies for the sole purpose of creating a charge to tax were ineffective as avoidance scheme.
Times 19-Aug-1997
Income and Corporation Taxes Act 1988 338
England and Wales
At ChD – McNiven (Inspector of Taxes) v Westmoreland Investments Ltd CA 26-Oct-1998
Cross loans were made between an investment company and pension schemes. The overall effect was to create payments which could be set off against Corporation Tax. They were not a pre-ordained series of transactions where the underlying loans were . .
At Chd – MacNiven (Inspector of Taxes) v Westmoreland Investments Ltd HL 15-Feb-2001
The fact that a payment of interest was made only to create a tax advantage did not prevent its being properly claimed. Interest was paid for the purposes of setting it against tax, when the debt was discharged. A company with substantial losses had . .
Lists of cited by and citing cases may be incomplete.
Updated: 10 May 2022; Ref: scu.83579
Interest relief against tax was allowed to residents in England farming in partnership in Scotland on interest payments on loan.
Times 18-Mar-1998
Income and Corporation Taxes Act 1988 353(1) 362(1)(b)
England and Wales
Updated: 10 May 2022; Ref: scu.83340
Time specified by tax payer for inspection of documents must be reasonable; no compliance in requiring inspection at just before midnight.
Gazette 10-Sep-1997
England and Wales
Updated: 10 May 2022; Ref: scu.82550
A taxpayer had transferred shares into an off-shore trust which was prohibited from benefiting himself or his wife. The trust however contained two powers, one to transfer any assets to any other trust, with no specification of possible beneficiaries, and a second power to obtain and act upon any counsel’s opinion upon any matter relating to a difference arising from the trust. The powers together nullified the first restriction, and the taxpayer retained benefit.
Times 06-Jul-1999
Income and Corporation Taxes Act 1988 739 to 746
England and Wales
Updated: 10 May 2022; Ref: scu.82340
Where a general commissioner ‘was unable to accept’ a taxpayers explanation of his income and expenditure, this implied acceptance of Tax Inspector’s case, and that was sufficient to discharge the burden on the Tax Inspector to establish a loss of tax.
Times 23-Nov-1998
England and Wales
Updated: 10 May 2022; Ref: scu.81553
(New Zealand) The taxpayer company sold cars to its dealers who resold them with warranties, for which it gave the dealers indemnities calculated on statistical average. The company sought to set off the reserve it created to make payments under the indemnities against the revenue of the year in which the cars were sold. The commissioner appealed its case to the Board.
Held: The reserve was claimable in the year of the car sale, even though the losses remained contingent. On the year of the sale the company acquired an accrued legal obligation, and had properly deducted the liabilities incurred against its profits.
Lord Hoffmann
Gazette 01-Nov-1995, [1996] AC 315
Inland revenue Act 1976 (New Zealand) 104
Updated: 10 May 2022; Ref: scu.79312
A company is not allowed to allocate set offs of interest payments against foreign income in such a way as merely served with double taxation relief to carry forward the maximum amount of loss.
Times 20-Jan-1999
Income and Corporation Taxes Act 1988 338(1) 393(9) 797(3)
England and Wales
Updated: 10 May 2022; Ref: scu.79297
The deceased’s estate held mainly an unsecured interest-bearing loan to a firm of which he had been a partner. On his retirement the loan was repayable on demand if conditions for the continued solvency of the firm were not met. The court was asked whether the audit and stock-taking costs – which the executor and trustee deemed necessary to enable him to determine whether the conditions had been observed or the loan had become repayable – were to be charged against capital or income. It was held at first instance that expenses already incurred in connection with the first audit and stock-taking should be borne by capital; but that future expenses of that nature should be charged against income.
Held: The appeal succeeded.
Lord Justice Lindley said: ‘Why is this expense to be thrown upon the tenant for life? For whose benefit is it incurred? It is really for the benefit of the whole estate, though the practical effect of throwing it upon the whole estate will be that the tenant for life will lose the income of the sums expended.’
Lord Justice Kay said: ‘Then comes the question out of what should the expense of the examination come – out of capital or out of income? In the first place the object of the provisions in the agreement is to ensure repayment of the capital . . Surely [the provision for examination] is a provision which the testator deliberately introduced into this agreement for the purpose of making himself safe as to the repayment of this capital which he had not charged in terms upon the capital of the business. The expense is one in which the persons entitled to the capital ought to share: why then should it all be thrown upon the tenant for life?’
A L Smith LJ said: ‘Here the payment is one which the trustee, for the benefit of the tenant for life as well as of the remaindermen, may properly incur in order to see whether the 15,000l., of which the tenant for life receives the present income, and the persons entitled in remainder take the ultimate benefit, is safe or not. It is quite clear, in my judgment that the expenses of these audits are costs, charges and expenses incurred for the benefit of the whole estate, and therefore ought to come out of capital and not out of income.’
Lindley LJ, Kay LJ, A L Smith LJ
[1896] 1 Ch 778
Cited – HM Revenue and Customs v Trustees of the Peter Clay Discretionary Trust CA 19-Dec-2008
The court was asked whether the Commissioners had been correct to disallow in a closure notice, the attribution in part to income in the year 2000-01 of expenses incurred by the trustees of a United Kingdom resident discretionary trust. The expenses . .
Approved – Carver v Duncan HL 1985
The court considered whether expenses, premiums paid in respect of life assurance policies, and the fees of professional investment managers, were properly to be set against the capital or income of a trust.
Held: Lord Templeman said: . .
Lists of cited by and citing cases may be incomplete.
Updated: 10 May 2022; Ref: scu.279007
Shareholders fearing a takeover sold their shares to another company’s subsidiary at below market value, the balance of value outstanding on an interest free loan. A commercial loan was used to buy further shares. When the loan was fully repaid the shareholders might reacquire their original shares and any others acquired in consideration of the cancellation of the original loan by the shareholders. The dividends were to be applied in paying the money due, both interest and capital. The Inspector assessed the shareholders to tax on the dividends on the shares as a settlement and they had not been excluded from the property. The shareholders disputed their liability on the ground that the arrangement did not constitute a settlement.
Held: The shareholders’ appeal succeeded. The scheme or arrangement was a bona fide commercial transaction.
Pennycuick J said: ‘Again, in case that imports in any respect a different test, it is clear that there was no element of bounty as between [the shareholders] and [S] . . To avoid misunderstanding, in the extraordinary wide field covered by such words as ‘agreement’ and ‘arrangement’, one may well find a commercial transaction between A and B and then built into that, so to speak, a transaction by way of bounty between A and C, but there is nothing of that kind here . . Clearly the [shareholders] did not intend to confer a bounty either on [Y] or on [S]. It may be that the transaction has been framed . . in such a way as to procure tax advantages to the [shareholders] but that circumstance does not of itself prevent it from being a bona fide commercial transaction or import any element of bounty.’
Pennycuick J
[1967] Ch 145
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Inland Revenue Commissioners v Plummer HL 1-Nov-1979
Although transactions were integrated as part of a preconceived scheme which was commercially marketed and that had no other conceivable purpose than that of saving surtax, the construction of the statute compelled the acceptance of a fiscal result . .
Cited – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Lists of cited by and citing cases may be incomplete.
Updated: 10 May 2022; Ref: scu.236559
An interest free loan was made to an associated company from the taxpayer’s mother which was then replaced by another interest free loan from the taxpayer. The circle of loans included an interest bearing loan to the taxpayer from the trustees of a settlement made by the taxpayer’s mother in which the taxpayer was interested. The Revenue assessed the taxpayer to tax on the income of the settlement which included the interest payable on the loan to him. The taxpayer accepted the conclusions of the Special Commissioners that the circular transaction constituted an ‘arrangement’ within the relevant definition and that the taxpayer was a settlor. The outstanding issue was whether the interest on the loan paid by the taxpayer to the trustees was income originating from him.
Held: ‘On the face of it, it obviously is income provided by him in the sense that he paid it, but it is common ground that it is implicit in the fasciculus of sections of which section 401 forms a part that some element of bounty is necessary to make the sections apply and that a bona fide commercial transaction would be excluded from their operation.’ and ‘The arrangement in my view must be looked at as a whole, and looked at in this way, I find it impossible to say that the [taxpayer] did not provide the trustees with an income of [the amount of the interest] a year in the sense in which the word ‘provided’ is used in s.401..that is to say as importing an element of bounty. The transaction, taken as a whole, was not, in my judgment, one which, from the point of view of the [taxpayer] can be described as a commercial arrangement because he was liable to pay [the amount of the interest] without any compensating advantage to him.’
Plowman J
(1964) 41 TC 589
England and Wales
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Cited – Jones v Garnett (Her Majesty’s Inspector of Taxes) HL 25-Jul-2007
The husband and wife had each owned a share in a company which sold the services of the husband. The Revenue claimed that the payment of dividends to the wife was a settlement.
Held: The Revenue failed. The share had been transferred to the . .
Lists of cited by and citing cases may be incomplete.
Updated: 10 May 2022; Ref: scu.236558
Income Tax, Schedule D – Non-resident firm – Exercise of trade within the United Kingdom – Income Tax Act, 1853 (16 and 17 Viet., c. 34), Section 2, Schedule D – Finance (No. 2) Act, 1915 (5 and 6 Geo. V, c. 89), Section 31.
[1926] UKHL TC – 10 – 481
England and Wales
Updated: 09 May 2022; Ref: scu.633833
Income Tax/Corporation Tax : Assessment/Self-Assessment – adoption of revenue functions by the NCA – Discovery Assessments – is knowledge that there is undeclared income, without more, sufficient to point an officer in the direction of there being an insufficiency of tax? – no – whether assessments valid – yes – whether satisfactory evidence to displace assessments – no – appeal dismissed
[2018] UKFTT 708 (TC)
England and Wales
Updated: 09 May 2022; Ref: scu.632440
The taxpayer had sold shares to a third party in 1933 under a contract which he came to say had been induced by fraud. In 1939 he obtained a judgment reducing the contract, with effect from the date that it was made, together with orders that the shares be retransferred to him and a sum paid to him representing the dividends which the purchaser had received while he was registered as the shareholder. After the judgment, the Revenue repaid the surtax assessed on the dividends in the hands of the fraudulent purchaser and assessed the taxpayer instead. The years of assessment were those in which the dividends had been paid by the company.
Held: The assessment was valid.in the Inner House of the Court of Session.
Lord President Normand said: ‘In this case the contract was not void; it was merely voidable on the ground that it had been induced by fraudulent misrepresentations. When a contract has been induced by fraudulent misrepresentations, it is open to the party defrauded either to sue for rescission of the contract or to sue for damages. In this case the party sued for rescission and in the end of the day he obtained a decree of reduction. The effect of that reduction was to restore things to their position at the date of the transaction reduced, with the result that as at that date and afterwards the successful pursuer in the action fell to be treated as having been the person in titulo of the shares which he had sold to the defender and therefore to have been in right of the dividends. No doubt it is true that in the interval the dividends had to be paid and were paid to the defender because his name stood in the register as the proprietor of the shares and no doubt also they were for the time being treated by the Inland Revenue as his income and while matters stood entire no other person had any right to the shares or to the dividends except the defender, Mr Crawford. But from the moment the reduction took place Mr Spence fell to be treated as having been throughout the proprietor of the shares and equally the person properly entitled to receive the dividends. On the other hand the Inland Revenue repaid to Mr Crawford the surtax attributable to the dividends actually paid to him by the company on the footing that he had never been in titulo to receive them.’
Lord President Normand
(1941) 24 TC 311
Scotland
Distinguished – Morley-Clarke v Jones (Inspector of Taxes) CA 1986
In 1969 an order had been made in divorce proceedings for the payment by the husband to the wife of a sum by way of maintenance for their child. In 1979 the order was varied with effect from the date of the original order, so as to make the sum . .
Cited – John Mander Pension Trustees Ltd v Revenue and Customs SC 29-Jul-2015
The pension scheme had been approved, but that approval later withdraw. HMRC issued assessment for the years in which it had been approved. The taxpayer argued that such assessments applied to the date with effect from which the approval is . .
Lists of cited by and citing cases may be incomplete.
Updated: 09 May 2022; Ref: scu.591247
In 1969 an order had been made in divorce proceedings for the payment by the husband to the wife of a sum by way of maintenance for their child. In 1979 the order was varied with effect from the date of the original order, so as to make the sum payable directly to the child, because this would be more tax efficient. It was certainly more tax efficient for the future, because the child had no other income. But the Revenue assessed the wife to income tax on maintenance received by her between 1969 and 1979 without regard to the retrospective variation.
Held: The assessments were upheld.
Oliver LJ said: ‘A retrospective order cannot, any more than a retrospective agreement, undo the past and convert something that has already happened, and to which legal consequences have already attached, into something which never in fact did happen . . [In Spence] the restitutio in integrum represented by the court order obtained some years later did not so much reconstruct history as recognise and declare that which had all along been the legal position, although until the order the parties were in a state of some uncertainty as to what their rights were.’
Oliver LJ
[1986] Ch 31
England and Wales
Distinguished – Spence v Inland Revenue Commissioners IHCS 1941
The taxpayer had sold shares to a third party in 1933 under a contract which he came to say had been induced by fraud. In 1939 he obtained a judgment reducing the contract, with effect from the date that it was made, together with orders that the . .
Cited – John Mander Pension Trustees Ltd v Revenue and Customs SC 29-Jul-2015
The pension scheme had been approved, but that approval later withdraw. HMRC issued assessment for the years in which it had been approved. The taxpayer argued that such assessments applied to the date with effect from which the approval is . .
Lists of cited by and citing cases may be incomplete.
Updated: 09 May 2022; Ref: scu.591248
(1988) 60 TC 706
England and Wales
Cited – Blackburn (HM Inspector of Taxes) v Keeling CA 21-Aug-2003
The tax payer sought to have reflected in his PAYE coding, his substantial trading losses arising from his activities as a Name /underwriter at Lloyds in 2003.
Held: The underwriting year 2003 ends in the year of assessment 2003/4, and . .
Lists of cited by and citing cases may be incomplete.
Updated: 09 May 2022; Ref: scu.185677
Tax/NI Contributions deducted from sick pay were not a loan, and were not recoverable from the employee.
Ind Summary 28-Jun-1993
England and Wales
Updated: 08 May 2022; Ref: scu.78630
The fact that an interest payment may be aggregated with a payment of a different nature does not ‘denature’ the interest payment
Megarry V-C
[1981] STC 689
England and Wales
Cited – Pike v HM Revenue and Customs CA 20-Jun-2014
The taxpayer challenged rejection of his claim for a loss relief arising from a ‘relevant discounted security’ within the meaning of Schedule 13 to the Finance Act 1996.
Held: It would only be such if, taking the security as at the time of its . .
Lists of cited by and citing cases may be incomplete.
Updated: 08 May 2022; Ref: scu.526982
NATIONAL INSURANCE CONTRIBUTIONS – intermediary rules (‘IR35′) – whether worker to be regarded as in ’employed earner’s employment by the client’ – Social Security Contributions (Intermediaries) Regs 2000, reg 6 – yes – appeal dismissed
INCOME TAX – FA 2000, Sch 12 para 1 – whether worker to be regarded as an employee of the client – yes – appeal dismissed
[2004] UKSC SPC00404
England and Wales
Appealed to – Usetech Ltd v HM Inspector of Taxes ChD 8-Oct-2004
The taxpayer operated through a one man limited company employed by a recruitment agency to provide IT services to a customer. He appealed a finding that he was liable to pay tax as an employee.
Held: The appeal was dismissed. The legislative . .
Appeal from – Usetech Ltd v HM Inspector of Taxes ChD 8-Oct-2004
The taxpayer operated through a one man limited company employed by a recruitment agency to provide IT services to a customer. He appealed a finding that he was liable to pay tax as an employee.
Held: The appeal was dismissed. The legislative . .
Lists of cited by and citing cases may be incomplete.
Updated: 07 May 2022; Ref: scu.195950
The taxpayer company was the parent company of a group of subsidiaries, one of which traded as the manufacturer and retailer of shoes. The others either manufactured or sold shoes. The company built a warehouse which was let to a warehousing subsidiary (Jacksons Limited). Parts of the warehouse were used to store shoes from the manufacturing and retailing company, but most of the shoes stored there were shoes which had been delivered to the retailing companies and were held by them as stock. The holding company claimed allowances on the basis that the warehouse was used for part of the trade of Jacksons Limited consisting in the storage of shoes manufactured by the manufacturing and retailing subsidiary, but not yet delivered to a purchaser, so as to come within s.271(1)(d)(iii) of the Income Tax Act 1952. The Special Commissioners had accepted that on the evidence part of the trade of Jacksons Ltd did consist in the storage of shoes which qualified under s.271(d)(iii) but they rejected the contention that the whole building was used for that purpose. The Court of Session had held that it was not necessary to show that the building was wholly or mainly in use for the relevant part of the company’s trade. It could be a shared use, and the storage of the qualifying shoes did constitute part of Jacksons Ltd’s trade.
Held: The Court of Session’s decision was upheld. In order to qualify for relief for an industrial building is is not necessary that the qualifying use should be the sole or exclusive use made of the premises.
Lord Reid: ‘The shoes manufactured at Kilmarnock come within the scope of s. 271 (1)(d)(iii) because, when in this warehouse, they have not yet been delivered to any purchaser. But the other shoes in the warehouse have already been delivered to the Respondents or one of their subsidiary companies, having been purchased from other manufacturers. During the relevant period there were generally some 500,000 pairs of shoes in the warehouse at any one time, of which a third or so had come from Kilmarnock and the remaining two-thirds or so from outside manufacturers. While in the warehouse these shoes were not kept separate. They were classified so that in each part of the warehouse one would generally find some of the Kilmarnock shoes and some of the others.
The trade of this warehouse keeper is storing shoes from both these sources, and the contention of the Respondents is that, within the meaning of s. 271(2), storing the Kilmarnock shoes is a part of his trade. The Commissioners so found, and I think that this is clearly right. I reject the argument that there is no sufficient distinction between the ways in which the two kinds of shoes are treated to enable one to say that storing the one kind is one part of the trade and storing the other kind is another part. If a trader stores or sells or otherwise deals with two kinds of goods, A and B, I think that it is the ordinary use of language to say that dealing with A is one part of his trade and dealing with B is another part, and I see nothing in the context here to justify giving any other interpretation to ‘a part of a trade’ in s. 271(2). The question therefore comes to be whether this warehouse is in use for the purposes of that part of the warehouseman’s trade which consisted in the storing of Kilmarnock shoes.
Again taking the ordinary use of language, it appears to me that it clearly was. Premises can be and often are in use for more than one purpose, and I think that the whole of this warehouse was in use for both parts of the warehouseman’s trade, because both kinds of shoes could generally be found stored in every part of it.’
Lord Reid
44 TC 122, [1967] 1 WLR 501, (1966) 42 TC 675
Income Tax Act 1952 271(1)(d)(iii)
Scotland
Cited – Bestway (Holdings) Ltd v Luff (Inspector of Taxes) ChD 4-Mar-1998
The taxpayer company operated a wholesale cash and carry business from a number of self-service supermarkets. The stores sold groceries, household goods, tobacco, confectionery and various kinds of alcohol. Although the buildings were not open to . .
Cited – Revenue and Customs v Maco Door and Window Hardware (Uk) Ltd ChD 19-Jul-2006
The Revenue sought to disallow for industrial buildings allowance sums expended on warehouse premises which were to be used to store window products imported for use in other manufacturing processes.
Held: The Revenue’s appeal succeeded. ‘The . .
Cited – Maco Door and Window Hardware (UK) Ltd v Revenue and Customs HL 30-Jul-2008
The House was asked whether a warehouse used to store purchases made by the company from its parent company in Austria, was an ‘industrial building or structure’. It was agreed that the facility was used for the storage of materials for use in later . .
Lists of cited by and citing cases may be incomplete.
Updated: 07 May 2022; Ref: scu.244453
The taxpayer had other business, but purchased a substantial quantity of cloth and resold it. He said this was not by way of trade. The Revenue said that he had used all the standard trade practices, and it was taxable as such.
Held: The transactions were taxable.
Jowett J
[1926] 1 KB 550
Appeal From – Martin v Lowry (HM Inspector of Taxes) CA 1926
The appellant purchased the entire stock of government surplus aircraft linen. He had another main business and had intended to resell it immediately. When that failed to promise a profit he set out to sell and sold the material over several months . .
At first instance – Martin v Lowry (HM Inspector of Taxes) HL 7-Dec-1926
The taxpayer had purchased the entire war-surplus of aircraft cloth, expecting to sell it in one go at a profit. When the sale fell through, he sold it off, at a considerable profit, in a large number of smaller transactions. He argued that he was . .
Cited – FHR European Ventures Llp and Others v Cedar Capital Partners Llc SC 16-Jul-2014
Approprietary remedy against Fraudulent Agent
The Court was asked whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or . .
Lists of cited by and citing cases may be incomplete.
Updated: 07 May 2022; Ref: scu.235899
The appellant purchased the entire stock of government surplus aircraft linen. He had another main business and had intended to resell it immediately. When that failed to promise a profit he set out to sell and sold the material over several months in many smaller transactions. He claimed not to have been in trade in this exercise, saying it was just one gambling exercise, and appeal a finding that he was in trade.
Held: the taxpayer’s approach was untenable: ‘The Appellant entered upon this separate and new trade, or business, or adventure, for the purpose of realising profits or gains in it, and even if his purchase was made under a single contract, the realisation of his profits, which were large, was accomplished by his setting up a trading organisation. ‘ He then said that these were not ‘annual profits’. As to this the system of Income tax was that the charge to tax was established annually by statute, and made no provision for taxation beyind that range: ‘the Acts contemplate and impose a tax for one year only.’ The argument failed; a casual profit arising from an isolated transaction in the course of the year was taxable in tha year.
Atkin LJ: ‘If one could adopt as a rigid canon of construction an assumption that in any statute the same word is always used with the same meaning, one’s task would perhaps be easier; but it is plain that the assumption is ill-founded, and particularly so in regard to the Income Tax Acts. We must have regard to the context. When the history of the Income Tax Acts is looked at, the meaning of the words in question becomes plain.’ and
‘I am inclined to accede to the argument that ‘annual’ often, perhaps usually, connotes recurrence, and that it is sometimes used with that connotation in the Income Tax Acts, on the other hand it sometimes means ‘of the year’, and is also used in that connotation in the Income Tax Acts. In the context in which it is used in this Schedule it appears to me to mean profits of the year of charge. In that view the question that arises in respect to them is not whether they are recurrent or capable of being recurrent. With that quality an Act imposing taxation for a year only may be considered to take little concern. The question is whether they can fairly be brought within the main purview of the Acts, which is to tax income, not capital, and whether, if they are profits in the sense of income, they arose within the year in respect of which the Legislature is exacting revenue. ‘
Pollock MR, Atkin, LJ
(1926) 1 KB 550
England and Wales
Appeal From – Martin v Lowry (HM Inspector of Taxes) KBD 15-Jun-1925
The taxpayer had other business, but purchased a substantial quantity of cloth and resold it. He said this was not by way of trade. The Revenue said that he had used all the standard trade practices, and it was taxable as such.
Held: The . .
Appeal from – Martin v Lowry (HM Inspector of Taxes) HL 7-Dec-1926
The taxpayer had purchased the entire war-surplus of aircraft cloth, expecting to sell it in one go at a profit. When the sale fell through, he sold it off, at a considerable profit, in a large number of smaller transactions. He argued that he was . .
Cited – FHR European Ventures Llp and Others v Cedar Capital Partners Llc SC 16-Jul-2014
Approprietary remedy against Fraudulent Agent
The Court was asked whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or . .
Lists of cited by and citing cases may be incomplete.
Updated: 07 May 2022; Ref: scu.235900
The House considered whether British American had a ‘controlling interest’ in a subsidiary of its direct subsidiary. The company argued that ‘controlling interest’ equated to beneficial ownership. In rejecting that argument Viscount Simon said: ‘I find it impossible to adopt the view that a person who (by having requisite voting power in a company subject to his will and ordering) can make the ultimate decision as to where and how the business of the company shall be carried on and who thus has, in fact, control of the company’s affairs, is a person of whom it can be said that he has not in this connection got a controlling interest in the company.’
Viscount Simon
[1943] AC 335, [1943] 1 All ER 13
England and Wales
Distinguished – Bermuda Cablevision Limited and others v Colica Trust Company Limited PC 6-Oct-1997
(Bermuda) An alternative remedy to winding up is available to a shareholder where oppressive conduct is alleged, though the main thrust is that the conduct is unlawful. . .
Lists of cited by and citing cases may be incomplete.
Updated: 06 May 2022; Ref: scu.221571
Lord Herschell said: ‘The profit of a trade or business is the surplus by which the receipts from the trade or business exceed the expenditure necessary for the purpose of earning those receipts.’
Lord Herschell
(1888) 13 App Cas 418
England and Wales
Cited – Geoffrey Chatwin v Janice Lowther CA 21-May-2003
The case concerned the meaning of the phrase ‘compensation for earnings lost’ as it applied to self employed persons.
Held: The fact that a person’s accounts described fees as turnover, did not prevent them being still earnings within the Act. . .
Lists of cited by and citing cases may be incomplete.
Updated: 06 May 2022; Ref: scu.185766
Income Tax, Schedule D – English Company controlled abroad carrying on trade in the United Kingdom – Information – Income Tax Act, 1853 (16 and 17 Viet., c. 34), Section 2, Schedule D – Taxes Management Act, 1880 (43 and 44 Viet., c. 19), Section 59 (4).
[1925] UKHL TC – 9 – 445
England and Wales
Updated: 06 May 2022; Ref: scu.633846
Stamp LJ referred to: ‘the income tax rule that you may not be taxed on an anticipated profit.’
Sir John Pennycuik said: ‘But it is likewise well established that the principles of commercial accountancy must yield not only to statutory provisions, in particular the prohibition of specified deductions, but also to any overriding principle of tax law.’
Stamp LJ, Sir John Pennycuik
[1977] Ch 78
England and Wales
Appeal from – Willingale (Inspector of Taxes) v International Commercial Bank Ltd HL 1978
Discount on a commercial bill differs from interest because, unlike interest, it does not accrue from day to day. If the discount is income, it is assessable to the holder at maturity or when the bill is sold by the holder to a third party because . .
Lists of cited by and citing cases may be incomplete.
Updated: 06 May 2022; Ref: scu.526983
Mr Newsom, a barrister, sought to deduct the costs of travelling between his chambers in London and his home in Whipsnade or income tax purposes. He carried out a good deal of his professional work in his well-equipped study at home, especially during court vacations (when he only visited his London chambers on rare occasions for conferences). The Special Commissioners had found that in court vacations the basis of Mr Newsom’s professional operations moved from London to Whipsnade. In the High Court, Danckwerts J held that none of the travel expenses were deductible, since the reason the expenses had been incurred was because Mr Newsom wanted to live in the country, and it followed that the travel to and fro had a mixed purpose (partly professional and partly ‘the requirements of his existence as a person with a wife and family and a home’) and the expenses of that travel therefore failed the ‘wholly and exclusively’ test. He now appealed.
Held: The appeal failed, though each judge gave slightly differing reasons.
Sommervell LJ took the view that the expenses of travel to and fro should be aggregated and treated together. He considered that Mr Newsom’s chambers in London remained his ‘professional base’ throughout the year. This does not seem to have been his reason for dismissing the appeal however. Instead, he found that the location of Mr Newsom’s house ‘had nothing to do with’ his practice. It was simply his home, and the fact that he did a significant amount of professional work there did not change that fact. Accordingly, he doubted that there was any professional purpose to the travelling, but if there was it was certainly subsidiary to the private purpose.
Denning LJ made a tacit assumption that every trade, profession or occupation has a single ‘base’. On that assumption, all that was necessary was to identify the base and then it was quite clear that the cost of travel between the home and that base was not deductible. It was incurred, in his view, ‘for the purposes of his living there and not for the purposes of his profession, or at any rate not wholly or exclusively’. He found that Mr Newsom’s base was at his chambers in London and therefore he held that the commuting costs were not deductible.
Romer LJ first reasserted the general proposition that normally, travel between home and work has as its object ‘not to enable a man to do his work but to live away from it.’ He then considered whether anything was changed as a result of a taxpayer doing work at home as well as at his normal place of work. He considered that it changed nothing, at least in Mr Newsom’s case, essentially because if Mr Newsom had not travelled at all, he could have carried on his profession perfectly satisfactorily from his chambers in London. He dismissed any suggestion that Mr Newsom might have had two places of business, but without elaborating on his reasons for doing so.
Sommervell LJ, Romer LJ, Denning LJ
(1952) 33 TC 452, [1952] 1 Ch 7
Appeal from – Newsom v Robertson ChD 30-Apr-1952
Mr Newsom, a practising barrister sought to set off against his income, the expenses of travelling between his home and his chambers in London. The Inspector appealed the decision of the commissioners that he could do so. The rule required that the . .
Cited – Samadian v Revenue and Customs FTTTx 28-Jan-2013
FTTTx INCOME TAX – self-employed consultant geriatrician with office at home where he performed significant business functions – travel between home, places of employment and private hospitals where he saw . .
Lists of cited by and citing cases may be incomplete.
Updated: 06 May 2022; Ref: scu.503552
(Malaysia)
[1981] UKPC 34, 1981] STC 653
England and Wales
Updated: 06 May 2022; Ref: scu.443975
The taxpayer companies had purported to pay interest on debentures, but these payments were ultra vires and void.
Held: The court upheld the Special Commissioners’ disallowance of payments of interest ‘grotesquely out of proportion to the principal amounts secured’ as not being interest within the meaning of section 169. The sums could not accordingly be annual payments under the 1952 Act. Moreover, the payments of so-called interest were in fact gratuitous (and so unlawful) dispositions of the company’s money. Pennycuick J said: ‘A company can only lawfully deal with its assets in furtherance of its objects. The corporaters may take assets out of the company by way of dividend or, with leave of the court, by way of reduction of capital, or in a winding up. They may, of course, acquire them for full consideration. They cannot take assets out of the company by way of voluntary disposition, however described, and, if they attempt to do so, the disposition is ultra vires the company.’
Pennycuik J
[1964] 1 WLR 479
England and Wales
Cited – Progress Property Company Ltd v Moorgarth Group Ltd SC 8-Dec-2010
The appellants appealed against rejection of their claim that there had been an unlawful distribution of capital when the appellant had sold the share capital of a subsidary at an undervalue to the respondent purchaser. The valuation had . .
Lists of cited by and citing cases may be incomplete.
Updated: 06 May 2022; Ref: scu.427161
The system of tax relief called the business expansion scheme did not apply when land was given in exchange for shares in the qualifying company. The scheme gave relief for efforts in raising money. That could not be satisfied by property given in money’s worth.
Times 24-Apr-2000
Income and Corporation Taxes Act 1988 289
England and Wales
Updated: 05 May 2022; Ref: scu.89871
Where pension fund trustees engaged in the sub-under-writing of share issues in return for commission payments they became engaged in a trade and made themselves liable to taxation on the profits as such a trader.
Gazette 11-Nov-1998
Income and Corporation Taxes Act 1988 Sch D Case 1
Updated: 05 May 2022; Ref: scu.79176
TC Surtax – Foreign settlement of property in United Kingdom – Settlor and trustees non-resident – Power to revoke or determine – Finance Act, 1938 (1 and 2 Geo. VI, c. 46), Sections 38 (2) and 41 (4) (a).
[1957] UKHL TC – 37 – 383
England and Wales
Updated: 04 May 2022; Ref: scu.560137
Profits Tax – Capital allowances – Industrial building or structure – Miners’ dwelling-houses-‘ likely to have little or no value to the person carrying on the trade when the mine … is no longer worked ‘ – Income Tax Act, 1945 (8 and 9 Geo. VI, c. 32), Section 8 (3); Finance Act, 1947 (10 and 11 Geo. VI, c. 35), Eighth Schedule, Part I, Paragraph 1.
[1957] UKHL TC – 37 – 264
England and Wales
Updated: 04 May 2022; Ref: scu.560136
Income Tax, Schedule D – Deduction – Expenses – Timber merchant – Payments for right to fell and take standing timber.
[1957] UKHL TC – 37 – 188
England and Wales
Updated: 04 May 2022; Ref: scu.560135
Under Peruvian law the Respondent Company was bound to pay its employees in Peru prescribed compensation payments upon the termination of their services with the Company, subject to the fulfilment by the employee of certain conditions. The amount to be paid depended on (a) length of service and (b) rate of pay at the end of the period of service, except that a reduction in pay would not affect the amount to which an employee was entitled by reference to the period of service already performed. On appeal against assessments to Income Tax on the Company made under Case I of Schedule D for the years 1947-48 to 1951-52 inclusive, it was contended on behalf of the Company that upon proper principles of commercial accountancy amounts of compensation calculated to have accrued due to each employee from year to year as deferred remuneration should be allowed as a deduction. The Special Commissioners held that it was a matter of correct accountancy practice to make provision in the accounts for the sums in question, and allowed the appeal.
[1956] UKHL TC – 36 – 602
England and Wales
Updated: 04 May 2022; Ref: scu.560143
Surtax – Settlement – Trustees empowered to release capital in excess of stated sum – Power to determine provision of settlement-Finance Act, 1938 (1 and 2 Geo. VI, c. 46), Sections 38 (2) and 41 (4) (b).
[1957] UKHL TC – 37 – 416, (1957) 37 TC 416
England and Wales
Updated: 04 May 2022; Ref: scu.560138
The farm was farmed by a father and son in partnership. They had both lived in the original farmhouse, but a new house was built to house the son. The issue was whether the new house was a farmhouse or an agricultural cottage. If it was a cottage the whole of the expenditure on it could be claimed as an allowance, but if it was a farmhouse, only one-third could be claimed.
Held: It was a cottage. The fact that the son worked full time on the farm was decisive. After referring to Lindsay, Lord Clyde said: ‘Obviously, except in some very special case, a farm can only have one farmhouse from which the business is run. In the present case, it appears to me to be clear that the father’s house is the farmhouse for the purpose of the present farm, for according to the findings, his house is the place from which the farm operations are conducted.’ The court rejected the Crown’s contention that the new house could not be an agricultural cottage because the son was not an employee but a partner: ‘In my view the status or employment of the occupier of the premises is not the test, and the proper criterion is the purpose of the occupation of the premises in question. Here, indubitably, the purpose of the occupation of this ‘Dorran’ house is husbandry, for under the partnership agreement the son for whom it was built and who occupies it must give his whole time and attention to the business of the partnership. Upon that test, therefore, it seems to me clear that the ‘Dorran’ house in question is an agricultural cottage within the meaning of section 314 . . ‘
Lord President, Lord Clyde
(1962) 40 TC 379
England and Wales
Cited – Lindsay v Commissioners of Inland Revenue 1953
The court was asked whether a building was a farmhouse for the purpose of deciding whether reliefs were available for capital expenditure. . .
Cited – Lloyds TSB Private Banking Plc (personal representative of Rosemary Antrobus deceased) v Inland Revenue (Capital Taxes); Re Cookhill Priory (No 2) LT 10-Oct-2005
LT TAX – Inheritance Tax – agricultural property relief – agricultural value – agricultural property – farmhouses – whether house occupied by ‘lifestyle’ farmer could be farmhouse – held bid of such person could . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.242347
The company had paid a penalty during the First World War under the Customs (War Powers) Act 1915 for exporting goods without taking all reasonable care to secure that the ultimate destination should not be enemy territory. They sought to set off the penalty against income tax.
Held: The claim was disallowed. Although the incurring of the penalty was connected with the trade, in the sense that it would not have happened unless the trade had been carried on, it was not for the purposes of the trade but because of a wrongful act on the part of the company.
Lord Sterndale MR said: ‘It is perhaps a little difficult to put the distinction into very exact language’ but that the payment was not a ‘loss connected with the business but. . . a fine imposed upon the company personally.’
Warrington LJ said that the payment was not a loss ‘connected with or arising out of the trade’ because it was a sum which ‘the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty.’
Scrutton LJ said that the obvious answer to the question whether a trader could deduct penalties imposed for carrying on the trade in an unlawful manner was ‘Of course he cannot’ but said that he did not find it easy to explain the reasons. He cited some well-known dicta about the criteria for allowable deductions and went on to say: ‘. . [W]ere these penalties an expenditure necessary to earn the profits ? Were they paid for the purpose of earning the profits ? The answer seems to me to be obvious, that they were not; they were unfortunate incidents which followed after the profits had been earned.’
Lord Sterndale MR, Scrutton LJ, Warrington LJ
[1920] 2 KB 553, 36 The Tims LR 463
England and Wales
Cited – Newsom v Robertson ChD 30-Apr-1952
Mr Newsom, a practising barrister sought to set off against his income, the expenses of travelling between his home and his chambers in London. The Inspector appealed the decision of the commissioners that he could do so. The rule required that the . .
Cited – McKnight (Inspector of Taxes) v Sheppard HL 18-Jun-1999
The taxpayer sought to set off against tax some pounds 200,000 spent defending professional disciplinary proceedings. The House was asked whether this was ‘money wholly and exclusively laid out or expended for the purposes of the trade.’
Held: . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.197030
[1926] UKHL TC – 10 – 263
England and Wales
Updated: 04 May 2022; Ref: scu.633830
Income Tax – Public school-Profits from school fees – Whether profits, of trade-Income Tax Act, 1918 (8 and 9 Geo. V, c. 40), Section 37 (1) (b), and Schedule D-Finance Act, 1921 (11 and 12 Geo. V, c. 32), Section 30 (1) (c).
[1925] UKHL TC – 10 – 213
England and Wales
Updated: 04 May 2022; Ref: scu.633850
Income Tax/Corporation Tax : Penalty – self-assessment – penalty for deliberate failure to notify chargeability – HMRC failed to inform taxpayer he had been removed from self-assessment – reasonable excuse for failure to notify – appeal allowed
[2018] UKFTT 714 (TC)
England and Wales
Updated: 04 May 2022; Ref: scu.632469
Income Tax/Corporation Tax : Appeal – information notices – penalties – late appeals – valid notices of appeal -appeals dismissed
[2018] UKFTT 703 (TC)
England and Wales
Updated: 04 May 2022; Ref: scu.632430
Sir Ross Cranston
[2017] EWHC 1484 (Admin)
England and Wales
Updated: 04 May 2022; Ref: scu.588890
Lord Phillimore discussed the possible taxation of dividends in the hands of shareholders: ‘Their taxation would seem to be logical, but it would be destructive of joint stock company enterprise. . . The reason for their [scil, the shareholders’] discharge may be the avoidance of double taxation, or to speak accurately, the avoidance of increased taxation.’
[1923] AC 744
England and Wales
Updated: 04 May 2022; Ref: scu.573167
Lord Atkin said: ‘My Lords, it is now clearly established that in the case of a limited company the company itself is chargeable to tax on its profits, and that it pays tax in discharge of its own liability and not as agent for its shareholders. The latter are not chargeable with income tax on dividends, and they are not assessed in respect of them. The reason presumably is that the amount which is available to be distributed as dividend has already been diminished by tax on the company, and that it is thought inequitable to charge it again.’
Lord Wright said: ‘the shareholder is not taxed under Schedule D in respect of that part of his income which consists of dividends. The profits have been charged to tax in the hands of the company and that fact is deemed to redound to his benefit.’
Lord Atkin, Lord Wright
[1940] AC 51
England and Wales
Updated: 04 May 2022; Ref: scu.573166
S Ltd. a member of an oil and gas exploration syndicate, agreeing that the exploration work was to be carried out by one member of the syndicate on behalf of the other members. The costs, expenses, rewards and benefits accruing from the exploration operations were to be shared by the syndicate members in proportion to their participating interests. Gaspet Ltd as a member of the group entered into an ‘illustrative agreement’ with S Ltd agreeing to bear the share of the costs of the expenditure incurred by the operator for which S Ltd was responsible in return for taking the benefit of all S Ltd’s share of any petroleum won from the exploration. The court was asked whether the taxpayer company was entitled to capital allowances in respect of the part of the expenses which it paid pursuant to the illustrative agreement which represented research costs.
Held: The appeal failed. Kerr LJ said: ‘In the present case it is clear that the research was not directly undertaken by the taxpayer company. Was it, then, directly undertaken by someone else on behalf of the taxpayer company? As the judge said, the phrase ‘on behalf of,’ in particular in the context of the phrase ‘by or on behalf of,’ denotes the concept of agency. This is a perfectly straightforward concept, even if in a context such as the present it may require a wider interpretation than agency resulting from a direct contractual relationship. Where, as here, the taxpayer company did not directly undertake the work itself, I therefore ask myself whether the work was undertaken by anyone as its agent, allowing for this wider sense in favour of the taxpayer company.’
and ‘It is true, as Mr. Park reminded us, that the words ‘on behalf of’ can have a more extended meaning than agency, in the sense of ‘for the benefit of’ or ‘in the interests of.’ But I do not think that this is the sense in the present context. It would introduce a great deal of uncertainty into the effect of the section. A close relationship between the claimant and the undertaking of the research is inherent in the language. The concept is that the research is being undertaken directly, either personally or through an agent.’
Nicholls LJ said: ‘I agree with the judge that to be within the phrase ‘on behalf of’ the relationship must be one of agency, or akin thereto, although I think that there need not necessarily be a direct contractual link between the claimant and the person by whom the research is directly undertaken.’
Kerr, Nicholls LJJ
[1987] 1 WLR 769
Capital Allowances Act 1968 9(1)
Appeal from – Gaspet Ltd v Ellis (Inspector of Taxes) 1985
S Ltd was a member of an oil and gas exploration syndicate, the agreement relating to which provided that the exploration work was to be carried out by one member of the syndicate (the operator) on behalf of the other members. The costs, expenses, . .
Cited – Plevin v Paragon Personal Finance Ltd SC 12-Nov-2014
PPI Sale – No Recovery from Remote Parties
The claimant sought repayment of payment protection insurance premiums paid by her under a policy with Norwich Union. The immediate broker arranging the loan was now insolvent, and she sought repayment from the second and other level intermediaties. . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.538717
S Ltd was a member of an oil and gas exploration syndicate, the agreement relating to which provided that the exploration work was to be carried out by one member of the syndicate (the operator) on behalf of the other members. The costs, expenses, rewards and benefits accruing from the exploration operations were to be shared by the syndicate members in proportion to their participating interests. The taxpayer company was a member of the same group as S Ltd and entered into an ‘illustrative agreement’ with S Ltd. whereby it was to bear the share of the costs of the expenditure incurred by the operator for which S Ltd was responsible in return for taking the benefit of all S Ltd’s share of any petroleum won from the exploration. The issue in the case was whether the taxpayer company was entitled to capital allowances in respect of the part of the expenses which it paid pursuant to the illustrative agreement which represented research costs.
Held: Peter Gibson J said: ‘A capital allowance authorised under the Capital Allowances Act 1968 is treated as a trading expense deductible from profits for corporation tax purposes: section 73 of the Act of 1968. Section 91(1) of that Act governs the right to a capital allowance in respect of expenditure on scientific research and the material part of that subsection is as follows: ‘where a person – (a) while carrying on a trade, incurs expenditure of a capital nature on scientific research related to that trade and directly undertaken by him or on his behalf’ ‘ and ‘The phrase, ‘by him or on his behalf’ is to my mind one very familiar in ordinary language . . I would venture to say that its ordinary and natural connotation is that the act must be done by the claimant or his agent . . I am satisfied that [counsel for the Revenue] is correct in his submission that there must be a contractual link between the claimant and the person by whom the research is directly undertaken and the contractual link is one of agency or something akin thereto . .’
Peter Gibson J
[1985] 1 WLR 1214
Capital Allowances Act 1968 91(1)
Appeal from – Gaspet Ltd v Ellis (Inspector of Taxes) CA 1987
S Ltd. a member of an oil and gas exploration syndicate, agreeing that the exploration work was to be carried out by one member of the syndicate on behalf of the other members. The costs, expenses, rewards and benefits accruing from the exploration . .
Cited – Plevin v Paragon Personal Finance Ltd SC 12-Nov-2014
PPI Sale – No Recovery from Remote Parties
The claimant sought repayment of payment protection insurance premiums paid by her under a policy with Norwich Union. The immediate broker arranging the loan was now insolvent, and she sought repayment from the second and other level intermediaties. . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.538716
[1948] UKPC 92
England and Wales
Updated: 04 May 2022; Ref: scu.447837
Lord MacNaghten said: ‘Income tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else.’
Lord Macnaghten said of a relator action: ‘The initiation of the litigation, and the determination of the question whether it is a proper case for the Attorney-General to proceed in, is a matter entirely beyond the jurisdiction of this or any other court. It is a question which the law of this country has made to reside exclusively in the Attorney-General’
Lord MacNaghten
[1901] AC 26
England and Wales
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 – Gouriet v Union of Post Office Workers HL 26-Jul-1977
The claimant sought an injunction to prevent the respondent Trades Union calling on its members to boycott mail to South Africa. The respondents challenged the ability of the court to make such an order.
Held: The wide wording of the statute . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.441626
In computing a life insurance company’s profits for tax purposes, the company may take the actuarial surplus as a suitable starting point for dealing with transfers from reserves.
Lord President Inglis
(1889) 16 R 461
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 . .
Lists of cited by and citing cases may be incomplete.
Updated: 04 May 2022; Ref: scu.441621
The court considered whether expenses, premiums paid in respect of life assurance policies, and the fees of professional investment managers, were properly to be set against the capital or income of a trust.
Held: Lord Templeman said: ‘Trustees are entitled to be indemnified out of the capital and income of their trust fund against all obligations incurred by the trustees in the due performance of their duties and the due exercise of their powers. The trustees must then debit each item of expenditure either against income or against capital. The general rule is that income must bear all ordinary outgoings of a recurrent nature, such as rates and taxes, and interest on charges and incumbrances. Capital must bear all costs, charges and expenses incurred for the benefit of the whole estate.’ and
‘In the present appeals, the appellant trustees of the Paul settlement paid the annual premiums on assurance policies effected by the trustees in order to obtain policy moneys corresponding to the amount of capital transfer tax payable out of the trust fund in the event of the death of the settlor before 20 November 1979. The appellant trustees of the Devonshire settlement paid the annual premiums on endowment policies assigned to the trustees and on other endowment policies effected by the trustees. All these premiums were paid by the Paul settlement trustees and the Devonshire settlement trustees for the benefit of the whole of their respective trust funds because the capital of the trust will be augmented by the policy moneys which will be received if and when the policies mature, and the income of the trust will be increased as and when such augmentation of capital takes place, but not before that event takes place.’ and
‘The Devonshire settlement trustees also paid annual fees to a firm of investment advisers to keep under review and to advise changes in investments comprised in the trust fund. This was a recurrent charge but not an ordinary outgoing and was incurred for the benefit of the estate as a whole because the advice of the investment advisers will affect the future value of the capital of the trust fund and the future level of income arising from that capital.’
Lord Templeman, Lord Fraser of Tullybelton, Lord Roskill and Lord Brandon of Oakbrook
[1985] 1 AC 1082
England and Wales
Approved – In re Bennett, Jones v Bennett CA 1896
The deceased’s estate held mainly an unsecured interest-bearing loan to a firm of which he had been a partner. On his retirement the loan was repayable on demand if conditions for the continued solvency of the firm were not met. The court was asked . .
Cited – HM Revenue and Customs v Trustees of the Peter Clay Discretionary Trust CA 19-Dec-2008
The court was asked whether the Commissioners had been correct to disallow in a closure notice, the attribution in part to income in the year 2000-01 of expenses incurred by the trustees of a United Kingdom resident discretionary trust. The expenses . .
Lists of cited by and citing cases may be incomplete.
Updated: 02 May 2022; Ref: scu.279008
Rowlatt J held: ‘a conception of a trade . . differs in its nature, in my judgment, from the individual acts which go to build it up, just as a bundle differs from odd sticks. You may say, I think, without an abuse of language, that there is something organic about the whole which does not exist in its separate parts.’
Rowlatt J
[1925] 2 KB 37
Dicta Approved – Maco Door and Window Hardware (UK) Ltd v Revenue and Customs HL 30-Jul-2008
The House was asked whether a warehouse used to store purchases made by the company from its parent company in Austria, was an ‘industrial building or structure’. It was agreed that the facility was used for the storage of materials for use in later . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.276209
The House of Commons Ways and means committee resolved to assent to the imposition of income tax at the required rate for the next year.
Held: Such a resolution was inadequate to authorise the Crown to levy the tax by its deduction from the Bank’s dividends payable to its shareholders. Authority could be granted only by statute. Parker J said: ‘ No practice or custom, however prolonged or however acquiesced in on the part of the subject could be relied on by the Crown as justifying an infringement of the provisions of the unrepealed Bill of Rights.’
Parker J
[1913] 1 Ch 57, [1913] 82 LJ Ch 124, [1913] 108 LT 95, [1913] 29 TLR 42, [1913] 57 Sol Jo 43, [1913] 6 Tax Cas 136
Cited – Davidson v Revenue and Customs Excs 25-Jul-2008
VDT EXCISE – seizure of vehicle and goods – whether seizure challenged – restoration refused – whether appeal against non-restoration of vehicle – whether decision not to restore goods proportionate – whether . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.272909
The taxpayer lived in Scotland but was assessed to tax in respect of director’s fees paid to him by a company carrying on business in England. The assessment was confirmed by county general commissioners. The tax not having been paid, execution was levied on the taxpayer’s furniture in Scotland. The taxpayer applied to the Court of Session to set aside this diligence.
Held: The Court of Session could not set aside the determination of the commissioners. For that the taxpayer must resort to the English courts. But it was competent for the taxpayer to invoke the ‘preventive jurisdiction’ to stop the diligence of which he complained.
Lord Fleming
1931 SLT 405
Cited – Tehrani v Secretary of State for the Home Department HL 18-Oct-2006
The House was asked whether an asylum applicant whose original application was determined in Scotland, but his application for leave to appeal rejected in London, should apply to challenge those decisions in London or in Scotland.
Held: Such . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.245383
The court was asked whether a building was a farmhouse for the purpose of deciding whether reliefs were available for capital expenditure.
(1953) 34 TC 289
Cited – Lloyds TSB Private Banking Plc (personal representative of Rosemary Antrobus deceased) v Inland Revenue (Capital Taxes); Re Cookhill Priory (No 2) LT 10-Oct-2005
LT TAX – Inheritance Tax – agricultural property relief – agricultural value – agricultural property – farmhouses – whether house occupied by ‘lifestyle’ farmer could be farmhouse – held bid of such person could . .
Cited – Commissioners of Inland Revenue v John M Whiteford and Son 1962
The farm was farmed by a father and son in partnership. They had both lived in the original farmhouse, but a new house was built to house the son. The issue was whether the new house was a farmhouse or an agricultural cottage. If it was a cottage . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.242346
The company sought to set off against income tax, ex gratia payments it had made to employees as the business closed.
Held: Rowlatt J said: ‘Now I cannot conceive how, under those circumstances, there can be any evidence at all that the payments were made for the purpose of the trade, because that must mean for the purpose of keeping the trade going, and of making it pay. There was not any such purpose at all. The purpose was to wind it up …’
Rowlatt J
(1925) 12 TC 803
Cited – Commissioner of Inland Revenue v Cosmotron Manufacturing Company Limited PC 28-Jul-1997
(Hong Kong) The taxpayer company was winding down its business. As it closed it made substantial redundancy payments to its employees. The Commissioners rejected a suggestion that such payments could be set off against income, saying that the . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.236732
The company created a special class of preference shares and allotted them to the wives of the two shareholders and directors. When substantial preference dividends were paid to the wives, the husbands were assessed to tax on them. They conceded that the issue of the preference shares to the wives involved an element of bounty on the part of their husbands.
Held: The creation of the preference shares, the application by each wife and the allotment of the same constituted an arrangement or disposition within the definition of settlement. The wives contended that the subsection was disapplied. The judge rejected that submission on the ground that the preference share was ‘wholly or substantially a right to income’. The share conferred nothing except the right to 30% of the net profits before distribution of any other dividend and repayment on winding up of the nominal amount subscribed for their shares.
Sir John Vinelott
(1996) 70 TC 331
England and Wales
Applied – Copeman v Coleman 1939
A company had been formed to take over the taxpayer’s business. He held the shares equally with his wife. Later the company created a class of preference shares of andpound;200 each carrying a fixed preferential dividend, the right to vote if such . .
Cited – Jones v Michael Vincent Garnett (HM Inspector of Taxes) CA 15-Dec-2005
Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his . .
Cited – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Distinguished – Jones v Garnett (Her Majesty’s Inspector of Taxes) HL 25-Jul-2007
The husband and wife had each owned a share in a company which sold the services of the husband. The Revenue claimed that the payment of dividends to the wife was a settlement.
Held: The Revenue failed. The share had been transferred to the . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.236564
The company traded as rubber planters. A manager’s contract allowed for six months’ notice. The company agreed to sell its estates, and the sale was completed and the trade of the company discontinued. The manager was given notice to terminate his employment, and andpound;1,900 for the salary due to him for the six months and for commission he would have earned. The company was controlled from London and required him to continue to work to ensure a proper transfer of the company.
Upjohn LJ said: ‘Mr. Borneman has submitted that, in truth and in fact, this sum of andpound;1,900 was in reality paid to keep Mr. Paton working hard in the interests of his employers until the hand-over on 31st March, 1958 – for, as I have already pointed out, it was essential that the estates should at all times be kept in a first-class and efficient condition. Therefore, he submits that this is, in effect, additional remuneration paid to him for keeping on until 31st March.’ The argument was rejected. It did not accord with the legal character which the payment bore: ‘It is perfectly true that this payment might have been so devised that the Company might have been entitled to claim this as a deductible expense, as being the remuneration of Mr. Paton during this period; but, in fact, it was not so devised. … What the parties were intending to do was to give Mr. Paton ,1,900 in lieu of notice, which is as common a transaction as one can possibly have. In other words, they were paying him compensation for the fact that they were not going to employ him for the full time for which they were bound so to employ him: and, for that and other reasons, Mr. Paton was happy and willing to accept that arrangement. To my way of thinking, that payment cannot possibly be described as a payment for the purposes of trade. It was made because the Company was not going on to trade, and they were left with the possibility of an action for damages against them for breach of the agreement of employment. I accept Mr. Borneman’s submission that, though it was made on the occasion of discontinuance, it was not because of that, and it was not to enable them to discontinue business: they were going to do that anyway. But this payment was not made for the purposes of the trade they were going to carry on: it was to get rid of a possible law suit after discontinuance.’
Upjohn LJ
(1962) 40 TC 161
England and Wales
Cited – Commissioner of Inland Revenue v Cosmotron Manufacturing Company Limited PC 28-Jul-1997
(Hong Kong) The taxpayer company was winding down its business. As it closed it made substantial redundancy payments to its employees. The Commissioners rejected a suggestion that such payments could be set off against income, saying that the . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 May 2022; Ref: scu.236733
It was argued that income tax was levied on annual profits. Since the appellants profit was raised within one tax year and not repeated, he argued that it could not properly be described as ‘annual’
Held: Though the wording of the tax act was not without difficulty, the argument failed.
Rowlatt J
(1923) 8 TC 521
Updated: 30 April 2022; Ref: scu.235901