A British subject resident in England but domiciled in the United States was the life tenant of trusts administered in accordance with the law of the State of New York. The income of the trusts was paid in US$ into the beneficiary’s bank account with a bank in New York. The beneficiary drew cheques on that account in favour of banks in England and instructed them to convert them into sterling and credit the sterling equivalent to the beneficiary’s account with that bank. The English bank sold the US$ to the Bank of England, as required by the Exchange Control legislation then in force, and credited the proceeds of sale in sterling to the beneficiary’s account in England. The beneficiary was assessed to tax under Case V of Schedule D. The Special Commissioners discharged the assessments on the grounds that the American income had not been brought into the United Kingdom. Their decision was upheld by Wynn-Parry J and a majority of the Court of Appeal.
Held: The House reinstated the assessments. The beneficiary had received sums ‘from money or value arising from property not imported’. The beneficiary was liable for the tax claimed on the grounds that the ‘bringing in’ of a person’s income means the effecting of its transmission from one country to the other by whatever means. It is neither here nor there to ask whether anything, items of property or instrument of transfer, has actually been brought into the country or not. No more is it relevant to know what has happened to the taxpayer’s money in the country where the income arises. Ex hypothesi he has transferred it – in this case the dollar credit – to the purchaser who is to provide him with sterling. What use the purchaser may make of the dollars has no bearing on the question whether the taxpayer has received sums of sterling through remittance of his American income. The rule lists sources from which sums to be computed may have been received; and this additional wording has caused some of the mystificationin this branch of the law. These several instances of the way in which income may be remitted have been thought to limit the generality of the phrase ‘ actual sums received in the United Kingdom’. It was not intended to say in effect that whereas under Case IV all sums of foreign income were to be computable, if received in the United Kingdom, under Case V only those sums of income received were to be computable which were attributable to the specified operations or sources. There could be no reason for such a distinction. The sub-heads should be treated as illustrationsand construed generally.
Judges:
Lords Reid, Denning, Lord Radcliffe, Viscount Simmonds, Lord Cohen, Lord Tucker
Citations:
(1958) 39 TC 291
Jurisdiction:
England and Wales
Cited by:
Cited – Grimm v Newman Chantry Vellacott DFK CA 7-Nov-2002
Accountants appealed a finding of professional negligence. They had advised an american resident in Britain that he could transfer assets to his wife here without adverse tax consequences. At the trial the judge had considered an alternative scheme . .
Cited – Harmel v Wright ChD 1973
The taxpayer was domiciled in South Africa but resident in England. Before he came to England he arranged for the incorporation of two companies, Artemis Ltd and Lodestar Ltd. Artemis was controlled by the taxpayer but Lodestar, in which he had no . .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 01 December 2022; Ref: scu.183430