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 appeal failed (by a majority) Tax could not be charged on that basis. The tax was intended as a matter of basic principle to be on profits and gains forming income in the year of assessment, though measured by the income, not of that year, but of the preceding year.
Viscount Haldane approved a dictum in the CA, saying: ‘the general principle of the Acts is to make the tax apply only to a source of income existing in the year of assessment’.
Lord Sumner emphasised the width of the statutory language: ‘The rule . . relates to ‘profits’ on all discounts from whomsoever made. There is no definition of discount in the statutes; no restriction of it to transactions in use in the year 1842; no evidence of its meaning as a term of art at any time’
Lord Atkinson considered the language of the statute: ‘The words are not happily chosen, but must, I think, be taken to mean ‘all profits arising from discount”.
Viscount Cave emphasised that a purchase, of a Treasury bill from the Treasury, was a transaction by way of discount, and, if it were decided otherwise, ‘an easy way would be opened to money lenders of evading the payment of tax on their interest on short loans’. The legislation invited no investigation on what accretion was capital and what was income; the whole profit was to be treated as an income profit. A relevant factor of importance was that the amount secured by the bill remained unaltered.


Viscount Haldane, Lord Sumner, Lord Atkinson, Viscount Cave


[1921] UKHL TC – 8 – 57, [1921] 2 AC 222, 8 TC 57




Income Tax 1842


England and Wales


Appeal fromThe National Provident Institution v Brown (Surveyor of Taxes) CA 10-May-1920
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 . .

Cited by:

CitedShop Direct Group v Revenue and Customs CA 11-Mar-2014
The company sought to challenge the assessment to corporation tax of a very large repayment of VAT, together with an even larger amount of interest.
Held: The appeal failed. . .
CitedShop Direct Group v Revenue and Customs SC 17-Feb-2016
The Court considered the interpretation of the sections which applied corporation tax to post-cessation receipts. Companies had received from the Inland Revenue substantial repayments of VAT together with interest. There had been reorganisations of . .
Lists of cited by and citing cases may be incomplete.

Income Tax

Updated: 06 April 2022; Ref: scu.606459