32

Endnotes

¹ ITEPA s 7(2), (3) and (5).
² ITEPA s 7(2), (4) and (6).
³ Previously TA 1988, s 19(1) as recast, for 1989–1990 and later years by FA 1989, s 36(2). Until 1922, schedule E was confined to income from a public office (including the director of a company) or public employment; other employments were in schedule D. In 1922 employments were moved to schedule E unless they came with schedule D, case V; overseas remuneration from non-public office or employment remained in schedule D, case V until FA 1956, s 101 when the present three-case structure was introduced. See below at n 12.
⁴ Blakiston v Cooper [1901] AC 104, 5 TC 347, HL; however, the fact that the payment is not by the employer may be a factor in helping a court conclude that such a payment is not an emolument (Pritchard v Arundale [1972] ch 229, 47 TC 680).
⁵ Shilton v Wilmshurst [1991] STC 88, 64 TC 78; see also Lord Radcliffe in Hochstrasser v Mayes [1960] AC 376, 389, 392 who said that the test goes beyond one of simple reward for services but must still be referable to the performance of duties under the contract.
⁶ See Ward [1992] BTR 139.
⁷ TA 1988, s 833(4) as amended by ITEPA.
⁸ ITEPA s 62(2), ex TA 1988, s 131. A perquisite is merely a casual emolument additional to regular salary or wages (Owen v Pook [1970] AC 244, 225, [1969] 2 All ER 1, 5, per Lord Guest).
⁹ CAA 2001 s 15 but not for cars, ibid, s 36.
¹⁰ ITEPA part 11 (sections 682–712), ex TA 1988, s 203 (see below at §13A.4).
¹¹ FA 1989, s 36 see below §14.2.3.
¹² ITEPA part 2, ch 1 (s 3–5).
¹³ These words are taken from the judgment of Rowlatt J in Great Western Railway Co v Bater [1920] 3 KB 266, 274, 8 TC 231, 235 although Rowlatt J added the longer accepted words ‘subsisting permanent and substantive’. See, generally Napier [1981] Industrial Law Journal 52; and Ward [1989] BTR 281, 283-95. This is not a ‘complete’ definition (McMillan v Guest [1942] AC 561, 564, 24 TC 190, 201 per Lord Atkin). When Great Western Railway v Bater was decided schedule E covered only public offices or employments of a public nature; other offices or employments fell within schedule D. Bater concerned a railway clerk, and the House of Lords, undoing the accepted practice of decades, placed him in schedule D. The legislative response, anticipated by the 1920 Royal Commission, was to move all the offices or employments to schedule E (see Monroe, Intolerable Inquisition (Sweet and Maxwell, 1981), 25 et seq.
¹⁴ Lee v Lee’s Air Farming Ltd [1961] AC 12, [1960] 3 All ER 420, PC. The posts of director and managing director may be separate offices (Goodwin v Brewster (1951) 32 TC 80).
¹⁵ Dale v IRC [1951] 2 All ER 517, 34 TC 468; A-G v Eyres [1909] 1 KB 723.
¹⁶ Ellis v Lucas [1966] 2 All ER 935, 43 TC 276.
¹⁷ Mitchell and Edon (Inspectors of Taxes) v Ross [1961] 3 All ER 49, 40 TC 11.
¹⁸ Ministry of Housing and Local Government v Sharp [1970] 2 QB 223, [1969] 3 All ER 225.
¹⁹ Edwards v Clinch [1981] STC 617, 56 TC 367: duties of a public nature did not necessarily make the post an office.
²⁰ See Buckley and Oliver LJJ [1980] STC 438, 445d, 455d.
²¹ McMenamin v Diggles [1991] STC 419, 430, 431, 64 TC 286, 302, per Scott J
²² Ward [1989] BTR 281, 287.
²³ Ibid, 294.
²⁴ See generally Freedman IFS Tax Law Review Committee Discussion Paper No 1 February 2001.
²⁵ Davies v Braithwaite [1931] 2 KB 628, 635, per Rowlatt J; see Ward, above at n 21, 295–300.
²⁶ For example, the opinion of the Advocate–General in Asscher v Staatsecretarius [1996] STC 1025, 1031 para 28.
²⁷ Deakin and Morris, Labour Law (2nd edn 1998), §3.4. On the Canadian enterprise control test, see Flannigan (1988) 36 Can Tax Jo 145.
²⁸ Walls v Sinnett [1987] STC 236, 245, per Vinelott J.
²⁹ Deakin and Morris, ibid, §3.4.5; Yewen v Noakes (1880) 6 QBD 530, 538, 1 TC 260, 263, per Bramwell LJ.
³⁰ Deakin and Morris, ibid, §3.4.6; Beloff v Presdram [1973] 1 All ER 241, 250. See also the copyright case of Stevenson, Jordan and Harrison Ltd v Macdonald and Evans [1952] 1 TLR 101, 111, per Lord Denning.
³¹ Deakin and Morris, ibid, §3.4.7, citing Hall v Lorimer [1994] STC 23, CA and Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173.
³² Deakin and Morris, ibid, §3.4.8, citing O’Kelly v Trusthouse Forte plc [1984] QB 90, [1983] 3 All ER 456.
³³ For example the Employment Rights Act 1996, s 230(3).
³⁴ Deakin and Morris, above at n 25, §3.4.9; Ready-Mixed Concrete (South East) Ltd v Ministry of Pensions [1968] 2 QB 497, [1968] 1 All ER 433.
³⁵ Andrews v King [1991] STC 481.
³⁶ Hall v Lorimer [1994] STC 23, 66 TC 349, CA; followed in Barnett v Brabyn [1996] STC 716.
³⁷ McManus v Griffiths [1997] STC 1089, 70 TC 218.
³⁸ McMenamin v Diggles [1991] STC 419, 64 TC 286.
³⁹ Clayton v Lavender (1965) 42 TC 607.
⁴⁰ ITEPA s 6(5) referring to TA 1988, s 314.
⁴¹ Cooke v Blacklaws [1985] STC 1 (the illegality of the arrangement was a factor, but not a conclusive one).
⁴² For general problems, see Deakin and Morris, above at n 24, § 3.4.4.
⁴³ In Caldicott v Varty [1976] STC 418, [1976] 3 All ER 329, 51 TC 403 a civil servant seconded to work for the Fiji Government was held to be still employed by the Crown in the UK.
⁴⁴ ESC A37. If it is E’s taxable income it is hard to see how E can then deduct the sums when they are paid over to his employer since this is a disposition of income not the cost of earning it. It appears more correct to say that the obligation to account prevented the payment from having the quality of income in E’s hands.
⁴⁵ TA 1988, s 86.
⁴⁶ Davies v Braithwaite [1931] 2 KB 628, 635, 18 TC 198, 203, per Rowlatt J.
⁴⁷ Sidey v Phillips [1987] STC 87, 59 TC 458.
⁴⁸ [1980] BTR 233.
⁴⁹ IRC v Brander and Cruickshank [1971] 1 All ER 36, 46 TC 574. Compare Marsh v IRC [1943] 1 All ER 199, 29 TC 120; Nock [1973] BTR 260.
⁵⁰ [1931] 2 KB 628, 18 TC 198. For a slightly more modern example, see Household v Grimshaw [1953] 2 All ER 12, 34 TC 366.
⁵¹ [1931] 2 KB 628, 635, 18 TC 198, 203.
⁵² [1973] STC 66, [1973] 1 All ER 368; no appeal was made. See Simon’s Tax Intelligence 1990, 173.
⁵³ [1973] 1 All ER 368, 374. The taxpayer had no other contracts at that time (unlike Miss Braithwaite); indeed, his was a full-time contract and one which prohibited him from taking on outside activities without his employer’s consent.
⁵⁴ In Mitchell and Edon v Ross, [1960] chs 498, 521, 40 TC 11, 43, in the Court of Appeal, Lord Evershed distinguished Davies v Braithwaite as not involving a contract of service. See also Bennett v Marshall [1938] 1 KB 591, [1938] 1 All ER 93, 22 TC 73.
⁵⁵ [1994] STC 23, CA.
⁵⁶ See, eg, Nolan LJ in Hall v Lorimer [1994] STC 23, 30e.
⁵⁷ Ready Mixed Concrete (South East) Ltd v Minister of Pensions [1968] 2 QB 497, [1968] 1 All ER 433; Sidey v Phillips [1987] STC 87, 59 TC 458.
⁵⁸ See Revenue Tax Bulletin, February 2000.
⁵⁹ See R (on application of Professional Contractors Group Ltd) v IRC [2001] STC 629 at paras 44–49 commenting on the current law on the boundary between employment and self-employment and the role of the Revenue in administering this legislation.
⁶⁰ O’Kelly v Trusthouse Forte plc [1984] QB 90, [1983] 3 All ER 456, CA. Cf Lord Widgery, CJ, in Global Plant Ltd v Secretary of State for Social Services [1972] 1 QB 139, 154, 155. See criticism by Pitt [1985] LQR 217.
⁶¹ See HC Official Report, Vol 45, cols 384–5, 13 July 1983, (1983) Simon’s Tax Intelligence 309.
⁶² See (1985) Simon’s Tax Intelligence 391. See also Simon’s Direct Tax Service, E4.211 for practice on particular occupations.
⁶³ Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689).
⁶⁴ The debate became known as the ‘IR35’ issue since this was the number of the original press release at the time of the 1999 Budget. Details of the revised proposals were contained in a press release, 23 September 1999, (1999) Simons Weekly Tax Intelligence 1587.
⁶⁵ ITEPA ss 51–53.
⁶⁶ ITEPA s 49(1)(c).
⁶⁷ ITEPA s 50.
⁶⁸ For example, Redston Taxation, Vol 143, 667 (1999).
⁶⁹ ITEPA s 50(4).
⁷⁰ On calculation see s 54(1) with its eight steps.
⁷¹ See the eight steps in s 54(1), ex paras 7–12.
⁷² See s 51(1), ex para 3, esp sub-para (1)(b).
⁷³ ITEPA s 48, ex para 2.
⁷⁴ ITEPA ss 56 and 57.
⁷⁵ For conditions see ss 52 and 53, ex paras 4, 5.
⁷⁶ ITEPA s 49, ex para 3(1), (2).
⁷⁷ ITEPA s 46(2), ex para 24.
⁷⁸ [1971] 1 All ER 36, 46, 46 TC 574, 595. This decision seems to make Income Tax (Employments) Regulation 1993 (SI 1993/744), reg 7(2)(b)(ii) superfluous. The concessionary relief at ESC A37 should also be noted—tax treatment of directors’ fees received by partnerships and other companies.
⁷⁹ ESC A4; and Inland Revenue interpretation RI 105.
⁸⁰ [1961] 3 All ER 49, 40 TC 11.
⁸¹ [1959] 3 All ER 341, 40 TC 11 (first instance); and [1960] 2 All ER 218, 40 TC 11, CA.
⁸² 40 TC 11, 32.
⁸³ On the concordat reached between the Revenue and the medical profession, see Simon’s Direct Tax Service E4.211, and for treatment of retirement benefit provision, see ESC A9.
⁸⁴ Under ITEPA ch 6, part 3 (ss 401 et seq), ex TA 1988, ss 148, 188(4).
⁸⁵ But it may still escape tax as a gift or a capital payment and not a trading receipt (see below at § 21.7).
⁸⁶ [1971] 1 All ER 36, 46 TC 574.
⁸⁷ ITEPA s 403 TA 1988, s 148 applies when the payment is not otherwise chargeable to tax. The finding that the post was an office and so within schedule E meant that the payment was not chargeable to tax under some other schedule, thus enabling s 403 to operate.
⁸⁸ (1960) 39 TC 164.
⁸⁹ [1971] 1 All ER 36, 45, 46 TC 574, 593.
⁹⁰ Ibid, 42, 590.
⁹¹ Ibid, 47, 595.
⁹² Ibid, 40, 588.
⁹³ If the taxpayer was not carrying on a profession, the payment might have fallen within schedule D, case VI, but this seems to be excluded by the conclusion that the post was an office and so within ITEPA. One consequence of Lord Guest’s view is that a company can hold an office and so have that income computed under ITEPA.
⁹⁴ Cf Pennycuick J in Blackburn v Close Bros Ltd (1960) 39 TC 164, 173.
⁹⁵ Chamberlain and Freedman (1997) Fiscal Studies 87; and see Freedman at n 24 above.
⁹⁶ ITEPA finally abolishes the three cases of schedule E—but as a matter of form rather than substance; on history of cases down to 1991, see Sheridan [1991] BTR 214.
⁹⁷ ITEPA s 21.
⁹⁸ Ibid, s 22.
⁹⁹ Ibid, s 23(2). On allocation of earnings where duties are performed partly in the UK and partly outside, see Statement of Practice SP 5/84.
¹⁰⁰ Ibid, s 22(5).
¹⁰¹ Ibid, s 24.
¹⁰² Ibid, s 25.
¹⁰³ Ibid, 25(1)(b); the term is defined in s 28. The regulation making power in s 28(5) makes ESC A25 redundant; this ESC refers to locally engaged (ie not UK-based) unestablished staff working abroad who are not resident in the UK and are not well paid.
¹⁰⁴ Ibid, s 26.
¹⁰⁵ Eg ibid, ss 425(1), 437(1) etc limiting the charge to cases where the employee is resident and ordinarily resident in the UK.
¹⁰⁶ ITEPA ss 25(2)(b), 26(3)(b) and 27(3)(b) Ex TA 1988 s 202A(2)(b) (reversing Bray v Best [1989] STC 159, HL). On finding the right year, see ITEPA s 30, s 19 para 4A (ex TA 1988, s 202A(3)).
¹⁰⁷ ITEPA s 30(3); this rule applies to general earnings but not to amounts treated as earnings under the benefits code s 30(4).
¹⁰⁸ ITEPA s 13(4) and (5), ex TA 1988, s 202A(3).
¹⁰⁹ See Taylor v Provan [1974] STC 168, 175, [1974] 1 All ER 1201, 1208; Barson v Airey (1925) 10 TC 609.
¹¹⁰ ITEPA s 39, TA 1988, s 132(2). Cf TA 1988, s 335; Robson v Dixon [1972] 3 All ER 671; 48 TC 527; Taylor v Provan [1973] 2 All ER 65, 74.
¹¹¹ ITEPA s 40 TA 1988, s 132(4); Graham v White [1972] 1 All ER 1159, 48 TC 163. The concessionary relief for the daily subsistence allowances paid to detached national experts seconded to the European Commission has now been made statutory and classed as an exemption so featuring in part 4 of the Act—see ITEPA s 304 (for concession see Inland Revenue Press Release, 29 March 1994, Simon’s Tax Intelligence 1994, 458.
¹¹² See s 25(1)(b); for old law see TA 1988, s 132(4).
¹¹³ ITEPA s 40.
¹¹⁴ ITEPA s 41.
¹¹⁵ ITEPA s 341(2)–(4).
¹¹⁶ ITEPA s 341(8).
¹¹⁷ Added by TA 1988, s 193(3).
¹¹⁸ ITEPA s 341(5).
¹¹⁹ , ¹⁰¹ ITEPA s 342(5) ex TA 1988 s 193(5).
¹²⁰ ITEPA ss 342(2)–(4).
¹²¹ Ibid, s 342(5).
¹²² ITEPA ss 342(6) and (7).
¹²³ ITEPA s 342(8), ex TA 1988, s 193(6).
¹²⁴ ITEPA s 370(3).
¹²⁵ On ‘wholly and exclusively’ in a slightly different context, see Mallalieu v Drummond below §22.2.
¹²⁶ ITEPA s 370(4) TA 1988, s 194(3).
¹²⁷ ITEPA s 370(5); on location of duties see s 372 excluding s 40(2) TA 1988, s 194(7)–(9).
¹²⁸ ITEPA s 371. The travel may be from or to ‘any place in’ the UK (ex s 194(3)).
¹²⁹ ITEPA s 371(1)(a).
¹³⁰ TA 1988, s 194(2).
¹³¹ ITEPA s 371(3) ibid, s 194(2). On costs of travel by a spouse wife to accompany a director or employee in precarious health, see ESC A4(d) (the phraseology of this concession is flagrantly sexist).
¹³² ITEPA s 371(4).
¹³³ ITEPA s 371(5).
¹³⁴ S 371(6).
¹³⁵ S 371(7): A person reaches 18 at the start of the day which is the eighteenth birthday (Family Law Reform Act 1969, s 9).
¹³⁶ ,⁹ Ibid, s 193(4)(a).
¹³⁷ Apportionment is authorised by ibid, s 376(3), ex 193(4).
¹³⁸ ITEPA ss 373–375, ex s 195.
¹³⁹ ITEPA s 375.
¹⁴⁰ ITEPA s 373(4) avoiding the old fashioned ‘place of abode’.
¹⁴¹ ITEPA s 373(4); apportionment is permitted by s 373(6).
¹⁴² ITEPA s 374 TA 1988, s 195(6).
¹⁴³ ITEPA ss 373(3) and 375, ibid, s 195(2), (3).
¹⁴⁴ ITEPA s 355, ex s 192(3).
¹⁴⁵ Schedule E Manual, para 4202.
¹⁴⁶ TA 1988, sch 12.
¹⁴⁷ Ibid, s 192A, added by FA 1998.
¹⁴⁸ TA 1988, s 188(3), sch 11, para 10.
¹⁴⁹ Ibid, sch 12, para 1A, added by F (No 2) A 1992, s 54.
¹⁵⁰ Inland Revenue Press Release, 17 March 1998 (1998) Simons Tax Intelligence 453.
¹⁵¹ Bray v Best [1989] STC 159; reversed by TA 1988, s 202A.
¹⁵² For accounts of the system, see RC (UK) 2nd Report, §§16–26, and 118th Report of the Board of Inland Revenue, Cmnd 6302 (1976), §§93–125. See now ITEPA part 11 (ss 682–-712) TA 1988, ss 203, 205–207, 828, and the Income Tax (Employments) Regulations 1993 (SI 1993/744). On preparations for use of electronic transfer of data see ITEPA s 684(2) TA 1988, s 203(10), added by FA 1998, s 119. For some dated comparisons with the United States, see Murray [1962] BTR 173.
¹⁵³ See Brodie, Taxation vol 145, 271 at 272.
¹⁵⁴ MacGregor [1956] 4 Can Tax Jo 171, 173; Carter, Study 16, 17.
¹⁵⁵ For example Glantre Engineering Ltd v Goodhand [1983] STC 1, [1983] 1 All ER 542, 56 TC 165.
¹⁵⁶ Income Tax (Employments) Regulations 1993, regs 40, 41.
¹⁵⁷ TA 1988 ss 559 et seq and the Income Tax (Employments) Regulations 1993.
¹⁵⁸ [1993] STC 436, 66 TC 29.
¹⁵⁹ ITEPA s 700, ex TA 1988, s 203FB; TA 1988, s 138 was repealed before s 203 FB came into force.
¹⁶⁰ [1993] STC 436, 442e.
¹⁶¹ Ibid, 443d.
¹⁶² Paul Dunstall Organisaton Ltd v Hedges [1999] STC (SCD) 26.
¹⁶³ DTE Financial Services v Wilson 2001 STC 776 at para 42, per Jonathan Parker LJ.
¹⁶⁴ Ibid, para 43.
¹⁶⁵ ITEPA s 686.
¹⁶⁶ In DTE Financial Services Ltd v Wilson above the Court of Appeal held that the payment fell within s 203(1) and so did not have to consider s 203F; for the Special Commissioner’s decision see [1999] STC (SCD) 121.
¹⁶⁷ ITEPA s 683(3)–(5).
¹⁶⁸ ITEPA s 683(2) referring to s 10(2) and (3) which embrace parts 4–7 inclusive.
¹⁶⁹ See also Booth v Mirror Group Newspapers plc [1992] STC 615.
¹⁷⁰ ITEPA s 692.
¹⁷¹ ITEPA s 687.
¹⁷² ITEPA s 691.
¹⁷³ ITEPA s 688. On practice, see RD4 (February 1992); see also FA 1998, s 55 for another example.
¹⁷⁴ ITEPA s 56.
¹⁷⁵ Blackburn (IoT) v Keeling [2003] EWHC 754 ch [2003] STC 639.
¹⁷⁶ Clark v Oceanic Contractors Inc [1983] STC 35 (where the branch was deemed to be in the UK by what is now TCGA 1992, s 276(7)).
¹⁷⁷ ITEPA s 689 TA 1988, s 203C; see also Inland Revenue Press Release, 11 April 1994, Simon’s Tax Intelligence 1994, 490.
¹⁷⁸ ITEPA s 690 TA 1988, ex s 203D; see also Inland Revenue Press Release, ibid.
¹⁷⁹ Made under ITEPA s 685. On coding, see the Income Tax (Employments) Regulations 1993, regs 6–13A.
¹⁸⁰ Ibid, reg 49.
¹⁸¹ Bernard and Shaw Ltd v Shaw [1951] 2 All ER 267; see the discussion by Weisbard (1996) NLJ 1124.
¹⁸² Note also the very special case of Philson & Partners Ltd v Moore (1956) 167 EG 92 where there had been an express term in a severance agreement between employer and employee that the employee should settle outstanding matters with the Revenue.
¹⁸³ Income Tax (Employments) Regulations 1993, reg 42(2).
¹⁸⁴ Ibid, reg 42(3); as in R v IRC, ex parte Sims [1987] STC 211, 60 TC 398; and R v IRC, ex parte Cook [1987] STC 434, 60 TC 405.
¹⁸⁵ Income Tax (Employments) Regulations 1993, reg 49(5); for an unsuccessful challenge by the employee, see R v IRC, ex parte McVeigh [1996] STC 91, 68 TC 121.
¹⁸⁶ Pawlowski v Dunnington [1999] STC 551, CA.
¹⁸⁷ ITEPA s 709, ex TA 1988, s 206.
¹⁸⁸ Walters v Tickner [1993] STC 624, 66 TC 174, CA.
¹⁸⁹ ITEPA s 703-707, ex TA 1988 s 206A and Income Tax (Employments) Regulations 1993, regs 80A–80N.
¹⁹⁰ Ibid, reg 36.
¹⁹¹ Ibid, reg 7(2)(b)(ii).
¹⁹² Ibid, reg 2(1).
¹⁹³ Statement of Practice SP 1/96.
¹⁹⁴ On compliance costs, see above at §1.3.5.
¹⁹⁵ Royal Commission Second Report, Cmd 9105 (1954), §130.
¹⁹⁶ It was regarded as responsible for such pre-1990 anomalies as a wife’s earned income allowance being the same as a single person’s, and not interfering with the husband’s claim to the married man’s allowance.

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