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Income Tax - From: 1960 To: 1969

This page lists 25 cases, and was prepared on 08 August 2015.

 
Hochstrasser -v- Mayes [1960] AC 376
1960
HL
Lord Radcliffe
Income Tax
With reference to a charge to tax under Schedule E the Act on profits or gains from employment, or emoluments: "For my part, I think that [the meaning of the statutory words] is adequately conveyed by saying that, while it is not sufficient to render a payment assessable that an employee would not have received it unless he had been an employee, it is assessable if it is paid to him in return for acting as or being an employee." The placing of a gloss on statutory words may be useful as illustrating the idea which the words express.
Income Tax Act 1952 156(2)
1 Citers



 
 Barclays Bank Limited -v- Inland Revenue Commissioners; HL 1960 - [1961] AC 509; (1960) 2 All ER 817
 
Unit Construction Co Ltd -v- Bullock [1960] AC 455
1960
HL

Company, Income Tax
The UK parent company owned subsidiaries incorporated in East Africa and carried on trading activities there. The managing director of the parent company concluded that 'the situation of the African subsidiaries was becoming so serious that it was unwise to allow them to be managed in Africa any longer, and that their management must be taken over by the directors of [the parent company] in London.' The board of directors of the parent company 'decided that . . they were forced to take over management and control', and the representative of the parent company in East Africa took over the functions of the local boards, which still existed but stood aside, and controlled the subsidiaries in accordance with the requirements of the parent. Much of that may have been irregular, or even unconstitutional, but it was what happened. Held: The African subsidiaries had become resident in the United Kingdom. A company can come to be resident in a territory even if it does not hold directors' meetings there.
1 Cites

1 Citers



 
 Abbott -v- Philbin (Inspector of Taxes); HL 21-Jun-1960 - [1960] UKHL 1; [1961] AC 352
 
Crossland -v- Hawkins [1961] Ch 537
1961
CA
Donovan LJ, Holroyd Pearce LJ, Upjohn LJ
Income Tax
The taxpayer, a well known film actor, agreed to work through a company for three years being paid £50 per week. The shares were transferred to his wife and accountant. His father in law set up a £100 settlement for the benefit of his children of which his wife and accountant were the trustees. The fund was used to subscribe for the remaining 98 shares. He appeared in a film for which the company was paid £25,000. The company paid a dividend which was applied by the trustees for the benefit of the children. Jack Hawkins then applied on behalf of his children for a repayment of tax to give effect to their personal allowances. The repayment claim was rejected on the grounds that the whole arrangement was a settlement of which Jack Hawkins was a settlor because he had provided the funds for it. Held: Jack Hawkins' appeal was dismissed. It was argued the settlement executed by the father in law had not been contemplated at the outset and could not be included in any arrangement. Donovan LJ: "I will accept for the moment the proposition that the family settlement which followed was not decided upon at the outset; but what is important, I think, is that the eventual enjoyment by some individual or individuals of the money which had escaped surtax must have been in contemplation at the outset. Otherwise, as I say, the scheme had no rational purpose." and "But, even were it otherwise, I think that there is sufficient unity about the whole matter to justify it being called an "arrangement" for this purpose, because, as I have said, the ultimate object is to secure for somebody money free from what would otherwise be the burden, or the full burden of surtax. Merely because the final step to secure this objective is left unresolved at the outset and decided upon later does not seem to me to rob the scheme of the necessary unity to justify it being called an "arrangement"."
Pearce LJ, agreeing said: "The mere fact that he [Jack Hawkins] did not concern himself with some of the steps in the legal machinery involved does not make it any the less his arrangement within the [section]. A man does not avoid the incidence of [the section] by merely being absent from, and leaving to his solicitors and accountants, certain parts of the legal machinery, if he is aware of the proposals for an "arrangement" or a settlement and actively forwards them by personally carrying out and assisting in the vital parts in which his performance and co-operation are necessary."
Income Tax Act 1952 397
1 Citers


 
Jenkinson (Inspector of Taxes) -v- Freedland (1961) 39 Tax Cas 636
1961

Donovan LJ
Income Tax
The court considered whether the purchase and sale of an item making a profit must count as acting in the course of trade so as to cause liability to income tax. Donovan LJ: "It cannot be right, therefore, to assert, as the Crown did before us, that whenever something is bought to re-sell at a profit an adventure or concern in the nature of trade necessarily results, and any finding of Commissioners to the contrary must be perverse. Otherwise there would hardly be any need to introduce a capital gains tax. It would virtually be here already. The true position, in my opinion, is that all the facts in each case must be considered, not merely the motive of acquisition, and a conclusion arrived at from such a comprehensive review."
1 Citers


 
Prince -v- Phillips (1961) 39 TC 477
1961

Biuckley J
Income Tax
A claim for relief was made by a parent in respect of a child who earned wages; the parent claimed to deduct from those wages the cost of the child travelling to and from work and of his midday meal. Held: The child's income was chargeable to tax under Schedule E and fell within Sch. 9, para. 7. "income in his own right" within the terms of s. 212(4) of the Income Tax Act 1952 meant income computed in accordance with the Income Tax Acts: that is to say, income for income tax purposes.
Buckley J. observed: "It has been submitted on behalf of the Crown that 'income' in Sub-section (4) must mean income in the same sense that it means elsewhere in the Act, that is to say, income for Income Tax purposes; and my attention has been drawn to two cases, Ricketts v. Colquhoun . . and Sanderson v. Durbridge . . which establish that for the purpose of tax under Schedule E the taxpayer is not entitled to deduct from his income expenses which do not arise actually in the performance of his office or employment, such as the cost of travelling to and from his work or the cost of providing himself with food during that part of the day when he is at work. I think that that submission is sound. Indeed, if it were not so, it seems to me that it would be exceedingly difficult ever to arrive at the amount of income which the child is said to be entitled to in his own right, because it would be extremely difficult to determine precisely what expenditure really was so essential as to be a proper deduction. I think travelling expenses and the cost of providing himself with a midday meal is something which the child has to provide out of his income, not something which has to be deducted before ascertaining his income."
Income Tax Act 1952 212(4)
1 Citers


 
Brown -v- Bullock (Inspector of Taxes) [1961] EWCA Civ 5; [1961] 3 All ER 129; [1961] 1 WLR 1095
26 Jun 1961
CA
Lord Evershed MR, Harman KJ
Income Tax
Whether a bank manager could set off against his tax, the costs of memberships of local clubs and organisation which he was expected to join as a condition of his emplyment.
Income Tax Act 1952 (th Sch p7
[ Bailii ]
 
Godden -v- A Wilson's Stores (Holdings) Ltd (1962) 40 TC 161
1962

Upjohn LJ
Income Tax
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 £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: "Mr. Borneman has submitted that, in truth and in fact, this sum of ,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."
1 Citers


 
Commissioners of Inland Revenue -v- John M Whiteford & Son (1962) 40 TC 379
1962

Lord President, Lord Clyde
Income Tax, Scotland
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…"
Income Tax Act 1952 314
1 Cites

1 Citers



 
 Rae (Inspector of Taxes) -v- Lazard Investment Company Limited; HL 10-Apr-1963 - [1963] UKHL 7; 41 TC 1; [1963] 1 WLR 555; 41 Tax Cas 1
 
Inland Revenue Commisioners -v- Leiner (1964) 41 TC 589
1964

Plowman J
Income Tax
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."
1 Citers



 
 Ridge Securities Ltd -v- Inland Revenue Commissions; ChD 1964 - [1964] 1 WLR 479

 
 The British Broadcasting Corporation -v- Johns (HM Inspector of Taxes); CA 5-Mar-1964 - [1965] Ch 32 CA; [1964] EWCA Civ 2; [1964] 41 TC 471; (1964) 43 ATC 38; [1964] 1 All ER 923; [1964] 2 WLR 1071; [1964] TR 45; [1964] RVR 579; [1964] 10 RRC 239

 
 Rendell -v- Went (Inspector of Taxes); HL 5-May-1964 - [1964] UKHL 5; [1964] 1 WLR 650; [1964] 2 All ER 464
 
Vandervell -v- Inland Revenue Commissioners [1966] UKHL 3; [1967] 2 AC 291
24 Nov 1966
HL
Lord Reid, Lord Pearce, Lord Upjohn, Lord Donovan, Lord Wilberforce
Equity, Income Tax
The taxpayer made a gift of shares to a trust set up to fund a medical professorship. The shares were in a private company, and an option was given for their repurchase once a certain level of dividends had been attributed to them. He was assessed to substantial surcharges on them on the basis that the arrangement was a settlement under which he retained an interest and of which he had not divested himself absolutely.
Income Tax Act 1952 411 415 - Law of Property Act 1925 53
1 Cites

1 Citers

[ Bailii ]
 
Saxone Lilley & Skinner (Holdings) Ltd -v- Commissioner of Inland Revenue 44 TC 122; [1967] 1 WLR 501; (1966) 42 TC 675
1967
HL
Lord Reid
Income Tax, Scotland
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."
Income Tax Act 1952 271(1)(d)(iii)
1 Citers


 
Mason -v- Innes [1967] 44 TC 326
1967


Income Tax
The court considered the taxation of gifts of literary or other professional works.
1 Cites


 
Bulmer -v- Inland Revenue Commissioners [1967] Ch 145
1967

Pennycuick J
Income Tax
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: "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."
1 Citers


 
Inland Revenue Commissioners -v- Korner [1969] 1 All ER 679; [1969] 1 WLR 554
1968
HL
Lord Upjohn
Income Tax
The House was asked whether expenses in repairing and maintaining a farmhouse, the House of Elrig, could be set off against income tax. The farmhouse had twenty rooms, but only one was used for the farm. Held: The expenditure could be set off in full. The test of whether property was such as could benefit from income tax relief as an agricultural property was that of the reasonable man.
Lord Upjohn said: "My Lords, the Special Commissioners in the Case Stated said that they were not satisfied that the House of Elrig was 'the farmhouse', within the meaning of the Income Tax Act 1952, of the land occupied for the purposes of husbandry by the Korner family. In its Case before your Lordships' House the Crown said that it shared those doubts but was prepared to make the concession, so your Lordships are not directly concerned with the question. But I think it right to say that I am no more satisfied than were the Special Commissioners that this house could properly be described as "the farmhouse" within section 526. This is a matter of fact to be decided in the circumstances of each case, and I would think that to be "the farmhouse" for the purposes of the section it must be judged in accordance with ordinary ideas of what is appropriate in size, content and layout, taken in conjunction with the farm buildings and the particular area of farmland being farmed and not part of a rich man's considerable residence."
And “The result of ... Schedule D was that, apart altogether from s.526, the farmer occupying a house (no doubt with his wife and children) for the purpose of his farming activities would be entitled to claim a proportion of the reasonable and necessary expenditure upon the maintenance of his house as a deduction from his assessment to tax for the purposes of Schedule D. This practice is very old, works great justice between the Crown and the subject and I trust will never be disturbed. Thus speaking generally the grocer living above his shop, the doctor who has a surgery in his house and the barrister who works in his house where he keeps or brings his law books and works on his briefs in the evenings and at weekends is allowed by the Crown a reasonable sum in respect of the necessary upkeep of his dwelling as being properly attributable to his trading or professional activities.
So that in the present case there is no doubt, and indeed it is not disputed, for I did not understand the Solicitor- General for Scotland to challenge this proposition in his reply, that, apart from s.526, the respondents are, in any event, entitled to a proportion of the expenses, and it is agreed between the parties that this proportion should be one tenth .”
Income Tax Act 1952 124(1) 137 526
1 Citers



 
 Wisdom -v- Chamberlain (Inspector of Taxes); ChD 1968 - [1968] 2 All ER 714; [1968] 1 WLR 1230
 
Bates -v- Inland Revenue Commissioners [1968] AC 483
1968
HL
Lord Upjohn, Lord Reid
Income Tax, Constitutional
Section 402, on its plain meaning, produced results in some cases which were ‘monstrous’ and which Parliament can never have intended. The Commissioners had not sought to amend the legislation, but realising the monstrous result of giving effect to the true construction of the section, worked out what they consider to be an equitable way of operating it which seems to them to result in a fair system of taxation. The court per Lord Upohn, could not understand upon what principle they couldproperly do so.
The words 'if the income of the body corporate' were therefore seen as capable of meaning either the whole of the income or some only of the income.
Income Tax Act 1952 402
1 Citers



 
 Wisdom -v- Chamberlain (Inspector of Taxes); CA 8-Nov-1968 - [1969] 1 All ER 332; [1969] 1 WLR 275; [1969] 45 Tax Cas 92; [1969] 47 ATC 358; [1968] TR 345
 
Sargaison -v- Roberts [1969] 3 All ER 1072
1969
ChD
Megarry J
Income Tax, Land
The court was asked as to a taxpayer's entitlement to tax allowances under section 314 of the 1952 Act, and whether, for the purposes of the legislation, a transfer by the taxpayer into trust of a farm and the simultaneous grant by the trustees to him of a lease resulted in the whole of the taxpayer's interest in the land being transferred to another person (which would have disentitled him to his tax allowance) or operated to reduce his interest from ownership of a freehold to ownership of a lease. Held: Megarry J took the latter view. He said that the taxpayer's interest had uno ictu merely been reduced from ownership of the freehold to ownership of a lease.
Income Tax Act 1952 314
1 Citers


 
Mapp (Inspector of Taxes) -v- Oram [1969] UKHL 10; [1970] AC 362; [1969] 3 All ER 215; 45 TC 651; [1969] TR 269; [1969] 3 WLR 557
23 Jul 1969
HL

Income Tax
HL Income Tax - Child allowance - Income of child - Foreign employment - No remittance to United Kingdom - Whether child "entitled . . . to an income" - Income Tax Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), s. 212(4).
During the year 1965-66 the Respondent's son was an undergraduate reading modern languages at the University of St. Andrews. On his tutor's advice he had taken a teaching post in France from October 1964 to June 1965, after which he resumed his degree course at the University. His gross emoluments in 1965-66 from his French appointment were £150, which was wholly spent in France on board, travelling, etc.
The Respondent claimed child allowance for 1965-66 in the full amount of £165. On appeal, he contended (inter alia) that "entitled in his own right to an income" in s. 212(4), Income Tax Act 1952, meant only income chargeable to income tax. For the Crown it was contended that that expression must be read in its commonsense or everyday meaning. The General Commissioners held that the Respondent was entitled to the allowance claimed.
In the High Court the Crown abandoned its contention before the Commissioners but contended that "an income" meant income as computed for the purposes of Schedule E after deducting expenses allowable under para. 7 of Sch. 9, Income Tax Act 1952. In the Court of Appeal and the House of Lords the Crown contended that, although para. 7 of Sch. 9 had no direct application, it should be applied by analogy.
Held, that the Commissioners' decision was correct.
Income Tax Act 1952
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[ Bailii ]
 
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