The question was as to the scope of the words ‘yearly interest’ used in the Income Tax Acts of 1842 and 1853. The bankers of certain overseers for the poor allowed the latter by arrangement half-yearly interest at an agreed-on rate on the daily balances standing at their credit. The overseers claimed exemption for income tax in respect of the interest, on the ground that it was ‘yearly interest’ within the meaning of the Income Tax Act 1842.
Held: The claim was negatived by the Court. Rowlatt, J said: ‘What is the daily balance? It is not even a short loan, it is merely money at call, money payable on demand . . This is not yearly interest.’
Rowlatt J said: ‘The broad result of the decisions in those cases is, I think, that yearly interest means, substantially, interest irrespective of the precise time in which it is collected, interest on sums which are outstanding by way of investment as opposed to short loans or as opposed to moneys presently payable and held over or anything of that kind.’ and: ‘They (the overseers) are to levy rates as far as they can for their current expenditure. However, they must necessarily keep a small balance in hand, and they get interest upon it under the arrangements which the bank were willing to make. It is no doubt contemplated that the balance will continue for a long time; but what is the daily balance? It is not even a short loan; it is merely money at call, money payable on demand.’
Rowlatt J
[1915] 3 KB 381
Income Tax Act 1853, Income Tax Act 1842
England and Wales
Cited by:
Cited – Revenue and Customs v Joint Administrators of Lehman Brothers International (Europe) SC 13-Mar-2019
The Court was asked whether interest payable under rule 14.23(7) of the Insolvency Rules 2016 is ‘yearly interest’ within the meaning of section 874 of the Income Tax Act 2007. If so, the administrators must deduct income tax before paying interest . .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 17 January 2022; Ref: scu.671254
