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Income Tax - 1930- 1959

Income Tax. See also Corporation Tax. Also general taxes management issues.

These cases are extracted from a very large database. The entries on that database are now being published individually to the main swarb.co.uk website in a much improved form. As cases are published here, the entry here will be replaced by a link to the same case in that improved form on swarb.co.uk. In addition the swarb.co.uk site includes very substantial numbers of cases after 2000. Please take the time to look.  

This page lists 38 cases, and was prepared on 21 October 2013. These case are being transferred one by one to the main swarb.co.uk site which presents them better, with links to full text where we have it, and much improved cross referencing.
Leeming -v- Jones (Inspector of Taxes) [1930] 1 KB 279; [1930] 15 Tax Cas 333
1930

Rowlatt J
Income Tax
1 Cites

Fry (Inspector of Taxes) -v- Salisbury House Estate Ltd [1930] UKHL 1; [1930] AC 432; [1930] 15 TC 266
4 Apr 1930
HL
Income Tax
Link[s] omitted
Archer Shee -v- Garland [1930] UKHL 2
15 Dec 1930
HL
Income Tax
Link[s] omitted
Rutherford -v- Lord Advocate 1931 SLT 405
1931

Lord Fleming
Income Tax, Scotland Casemap
1 Citers
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.
The Herald and Weekly Times Ltd -v- Federal Commissioner of Taxation (1932) 48 CLR 113; [1932] HCA 56
21 Nov 1932

Gavan Duffy CJ and Dixon J
Commonwealth, Income Tax Casemap
1 Citers
(High Court of Australia) The taxpayer newspaper sought to set off against its liability to income tax, sums which it had paid out in damages for defamation. Held: They were deductible. Such claims against a newspaper are a "regular and almost unavoidable incident of publishing it" and the damages are compensatory rather than punitive.
Link[s] omitted
Dewar -v- Commissioners for Inland Revenue [1935] 2 KB 351; 19 TC 561
1935
CA
Lord Hanworth MR
Income Tax
1 Citers
The executor had been left a legacy of £1,000,000 free of duty. When it came due to be paid, he was entitled to interest at 4%, but did not claim the interest. He was assessed to surtax on the sum he could have received. Held: Since he had not received the sum, he was not to be taxed upon it. Lord Hanworth MR remarked: "'receivability' without receipt is nothing."
Timpsons Executors -v- Yerbury; CA 1936
Carter -v- Sharon (1936) 20 TC 229
1936

Lawrence J
Income Tax Casemap
1 Citers
A person domiciled in the United States but resident in England paid allowances to her daughter resident in England out of the income of her investments in the United States, by means of a banker’s draft drawn on a London bank payable to the daughter and posted to her in California. The banker’s draft was bought by the mother’s bank in California and debited to her account. The mother was assessed to tax under Case V of Schedule D on the amount of the allowances. The assessment was discharged by the Special Commissioners. On appeal it was Held: The Special Commissioners held that the gift to the daughter was completed in California, at the latest, when the banker’s draft was posted to her on her mother’s instructions. The judge concluded that the sections only caught income from foreign possessions which is either received by the taxpayer in the United Kingdom or to which he is entitled at the time it comes to the United Kingdom. He specifically rejected the argument for the Crown that if the subject matter of the gift comes to the United Kingdom by direction of the taxpayer it is received by the taxpayer. If there is a gift of foreign income completed outside the United Kingdom the donee may remit the subject matter or any other property representing it to the United Kingdom without a liability to United Kingdom tax being imposed on either the donor or the donee.
Radio Pictures -v- Commissioners of Inland Revenue [1938] 22 TC 106
1938
ChD
Lawrence J
Income Tax, Contract Casemap
1 Citers
The court considered whether a particular document could properly be included among the batch of documents which as a whole formed the contract, so that the stipulations therein were themselves contractual.
Inland Revenue Commissioners -v- British Salmson Aero Engines Ltd [1938] 2KB 482
1938
CA
Sir Wilfrid Greene MR
Income Tax Casemap

The court considered the applicability of certain provisions to royalty payments. The court considered the notorious difficulty of drawing a clear line between capital and income receipts: "There have been many cases which fall on the border-line. Indeed, in many cases it is almost true that the spin of a coin would decide the matter almost as satisfactorily as an attempt to find reasons. But that class of questions is a notorious one, and has been so for many years."
Copeman -v- Coleman (1939) 22 TC 594
1939

Lawrence J
Income Tax
1 Citers
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 £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 £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: "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]."
Commissioners of Inland Revenue -v- Payne; CA 1940
Beak -v- Robson (1942) 25 TC 33
1942
HL
Lord Simon
Income Tax
1 Citers
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 separate from the restrictive covenant and the consideration given for it. The sum was not paid for anything done in performing the services in respect of which the respondent was chargeable under Schedule F. "The consideration which he has to give under the covenant is to be given not during the period of his employment, but after its termination. He is giving to the company for a sum of £7,000 the benefit of a covenant which will only come into effect when the service is concluded." The payment to the employee escaped tax because the payment for the covenant was quite distinct from the payment for services under his contract for service.
Lomax -v- Peter Dixon & Son Ltd [1943] 2 All ER 255; [1943] KB 671; [1942] 25 TC 353
1942
CA
Lord Greene MR
Trusts, Income Tax Casemap

A substantial loan was made to be repaid on demand. An agreement was then made where the debtor issued to the creditor 680 loan notes of £500 each, amounting in total to £340,000 (a discount of 6%). The notes were to bear interest at a rate of about 5 per cent. 100 were to be repaid almost immediately and the rest over a period of 20 years. Each note was to be redeemed at a premium of 20% if the debtor’s profits reached a specified level. The issue was whether the discount and premium were capital or income for income tax purposes. Held: In considering what might be a normal return, it was necessary to consider the circumstances of the transaction or the terms of the security and each case had to be considered on its own facts. Lord Greene discussed the ordinary issue of debentures by a limited company. If the credit of the company was good and the security ample then the issue could be at par at a reasonable rate of interest. If the credit and the security were exceptionally good then the issue could be made at a premium, which would be capital because the subscriber would be getting a good security. Alternatively such a company could issue its debentures at par with a lower rate of interest. If the credit or security were not good then the company could issue the debentures at par but with a high rate of interest, or issue them at a discount with a normal rate of interest, or issue them at par with a premium on redemption. However, the premium on redemption and the premium on issue were the expression of the risk in terms of capital rather than in the terms of interest. Whether income tax was payable depended on the method chosen by the company. The discount and premium in that appeal were capital.
London County Freehold and Leasehold Properties Ltd -v- Sweet (1942) 24 TC 412
1942

Income Tax Casemap
1 Citers
Expenditure by a property company on the issue of new debenture stock was not "expenses of management" because raising capital was not part of the business of acquiring and managing property.
British American Tobacco Company Limited -v- Inland Revenue Commissioners [1943] AC 335
1943
HL
Income Tax Casemap

Wales (Inspector of Taxes) -v- Tilley [1943] UKHL 1; (1945) 25 TC 136
11 Feb 1943
HL
Lord Chancellor, Lord Atkin, Lord Thankerton Lord Russell of Killowen Lord Porter
Income Tax Casemap

The taxpayer was managing director of a company. The Revenue sought to tax him on two sums of £20,000 paid by to him by the company. The sums were paid in part as the price of compounding a pension, and in part in consideration of the reduction of the Appellant's annual salary. Held: A pension is not an emolument, and a lump sum paid to commute a pension is in the nature of a capital payment which is substituted for a series of recurrent and periodic sums which partake of the nature of income, but the same view should not be taken of an arrangement made between an employer and his servant under which, instead of the whole or part of a periodic salary, a single amount is paid and received in respect of the employment.
[ Bailii ]
Norman -v- Golder (Inspector of Taxes); 1944
Absalom -v- Talbot [1944] 1 All ER 642
1944
HL
Income Tax
Income Tax Act 1918
Spofforth and Prince -v- Golder (Inspector of Taxes) (1945) TC 310
1945

Income Tax Casemap

Blackwell (HM Inspector of Taxes) -v- Mills (1945) 26 TC 468
1945

Income Tax
1 Citers
Inland Revenue Commissioners -v- J. Bibby & Sons Limited [1945] 1 All ER 667
1945
HL
Income Tax
1 Citers
Ayrshire Employers' Mutual Ins Co -v- Inland Revenue Commissioners [1946] UKHL 3; (1946) 79 Ll L Rep 307; 27 TC 331; 1946 SLT 235; 1946 SC (HL) 1
29 Mar 1946
HL
Scotland, Income Tax
[ Bailii ]
Smith's Potato Estates Ltd -v- Bolland (Inspector of Taxes) [1948] AC 508
1948
HL
Income Tax Casemap

The taxpayer claimed to deduct the legal costs of contesting an assessment to tax. The dispute was about the computation of the taxpayer's profits. It assumed that those profits were ascertainable, one way or another, at the time when the dispute arose. The costs of the dispute could not therefore have been an element in the computation. They were logically as well as temporally subsequent to the profits having been earned.
Nugent-Head -v- Jacob; HL 1948
Capital and National Trust Limited -v- Golder; 1949
Bentleys, Stokes & Lowless -v- Beeson (HMIT) [1952] 33 TC 491
1952
CA
Romer LJ
Income Tax Casemap
1 Citers
The court considered whether the partners in a firm of solicitors could deduct from profits the expenses involved in entertaining clients to lunch. Held: They were deductible, notwithstanding the element of hospitality involved: " The relevant words of r 3 (a) of the Rules Applicable to Cases I and II—"wholly and exclusively laid out or expended for the purposes of the … profession"—appear straightforward enough. It is conceded that the first adverb—"wholly"—is in reference to the quantum of the money expended and has no relevance to the present case. The sole question is whether the expenditure in question was "exclusively" laid out for business purposes, that is: What was the motive or object in the mind of the two individuals responsible for the activities in question? It is well established that the question is one of fact: and again, therefore, the problem seems simple enough. The difficulty, however, arises, as we think, from the nature of the activity in question. Entertaining involves inevitably the characteristic of hospitality: giving to charity or subscribing to a staff pension fund involves inevitably the object of benefaction: an undertaking to guarantee to a limited amount a national exhibition involves inevitably supporting that exhibition and the purposes for which it has been organised. But the question in all such cases is: Was the entertaining, the charitable subscription, the guarantee, undertaken solely for the purposes of business, that is, solely with the object of promoting the business or its profit-earning capacity? It is, as we have said, a question of fact. And it is quite clear that the purpose must be the sole purpose. The paragraph says so in clear terms. If the activity be undertaken with the object both of promoting business and also with some other purpose, for example, with the object of indulging an independent wish of entertaining a friend or stranger or of supporting a charitable or benevolent object, then the paragraph is not satisfied though in the mind of the actor the business motive may predominate. For the statute so prescribes. Per contra, if, in truth, the sole object is business promotion, the expenditure is not disqualified because the nature of the activity necessarily involves some other result, or the attainment or furtherance of some other objective, since the latter result or objective is necessarily inherent in the act."
Newsom -v- Robertson; ChD 30-Apr-1952
Lindsay -v- Commissioners of Inland Revenue (1953) 34 TC 289
1953

Income Tax Casemap
1 Citers
The court was asked whether a building was a farmhouse for the purpose of deciding whether reliefs were available for capital expenditure.
Newsom -v- Robertson; CA 03-Jan-1953
Heasman -v- Jordan; 1954
Commissioners of Inland Revenue -v- Lactagol (1954) 35 TC 230
1954

Income Tax

1 Citers
Camille and Henry Dreyfus Foundation Inc -v- Inland Revenue Commissioners; CA 1954
Inland Revenue -v- Broadway Cottages; CA 26-Jul-1954
Sharkey -v- Wernher [1955] 36 TC 275; [1956] AC 58
1955
HL
Income Tax Casemap
1 Cites

Where a trader takes stock from his business for private use or for use in another business which he owns, or where he transfers to his business stock which he owns in some other capacity than that of proprietor of that business, the transfer should be dealt with for taxation purposes as if it were a sale or purchase at market value. Thus, goods that a trader takes from his trading stock, for example, for the personal use and enjoyment of himself and members of his household, should be credited at market value.
Morgan -v- Tate & Lyle Ltd; HL 1955
Southern Railway of Peru Ltd -v- Owen; HL 21-Jun-1956
Thomson -v- Moyse (1958) 39 TC 291
1958
HL
Lords Reid, Denning, Lord Radcliffe, Viscount Simmonds, Lord Cohen, Lord Tucker
Income Tax Casemap
1 Citers
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.

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