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Employment Income: Scope |
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1 [1959] ch 22. 2 [1966] AC 16, 30, 42 TC 351, 363. See also Browne-Wilkinson VC in Shilton v Wilmshurst [1990] STC 55, 59 and 61, 64 TC 78, 95, 99, CA. 3 [1989] STC 159, 167. 4 64 TC 78 at 109 per Lord Templeman. 5 [1976] STC 534, [1976] 3 All ER 636. 6 [1979] STC 34, [1979] 1 All ER 321. 7 [1960] AC 376, 38 TC 673. Kerridge [1982] BTR 272 argues that the case should have been decided on the basis that the housing arrangements were the subject of a collateral contract. On slightly different Canadian legislation, see the equivalent case of Ransom v MNR [1967] CTC 346, discussed by Arnold and Li (1996) 44 Can Tax Jo 1; and R v Phillips [1994] 1 CTC 383. 8 [1960] AC 376. 9 Ibid, 392, per Lord Radcliffe. 10 Wilcock v Eve [1995] STC 18, 67 TC 223. 11 [1960 AC 376, 396. Query if the loss were on shares of the employer company which he was obliged to sell on leaving the company (see above at §17.5.5). 12 [1991] STC 88, 64 TC 78; see Kerridge [1991] BTR 311. 13 [1991] STC 88, 91, 64 TC 78, 105. 14 Ward [1992] BTR 139 (written before Mairs v Haughey) [1993] STC 569; on which see [1994] BTR 77. 15 [1991] STC 42, 63 TC 729. 16 [1979] STC 34; Macdonald [1979] BTR 112. 17 [1971] 3 All ER 1011, 47 TC 680. 18 [1936] AC 1. 19 (1957) 37 TC 289, CA. 20 Hochstrasser v Mayes [1959] ch 22, per Viscount Simonds. 21 Mairs v Haughey [1993] STC 569; Carter v Wadman (1946) 28 TC 41. In Tilley v Wales [1943] AC 386, 25 TC 137 the House of Lords was relieved of the task of deciding whether an apportionment should be made since this was agreed between the parties. 22 This was left open by the Court of Appeal in Shilton v Wilmshurst [1990] STC 55, 64 TC 78. 23 The person making the payment may be required to deduct tax under the PAYE system (Booth v Mirror Group Newspapers [1992] STC 615). 24 Calvert v Wainwright. 25 Radcliffe v Holt (1927) 11 TC 621. However, will the emphasis on inducement as to future service mean that ordinary tips paid to a taxi driver, who, to the knowledge of the payer, is about to retire, escape tax? 26 Weston v Hearn (1943) 25 TC 425. 27 See ESC A22. 28 See Henley v Murray [1950] 1 All ER 908, 31 TC 351, 366, per Evershed MR: ‘nor was it a reward for his past service’ (not taxable); similarly, Lord Warrington in Hunter v Dewhurst (1932) 16 TC 605, 643. 29 As in Cowan v Seymour [1920] 1 KB 500, 7 TC 372; Denny v Reed (1933) 18 TC 254. 30 [1972] 3 All ER 399, 48 TC 338. 31 For example Lord Denning MR in Jarrold v Boustead [1964] 3 All ER 76, 81; and Lord Simon in Tilley v Wales [1943] AC 386, 393, 25 TC 136, 149. 32 Prendergast v Cameron (1939) 23 TC 122, 138, Finlay LJ. 33 For authority against such usage, see Walton J in Brumby v Milner [1975] STC 215, 227, 51 TC 583, 598; and Lord Coulsfield in IRC v Herd [1992] STC 264, 286, 66 TC 29, 55; however, see Goldberg [1971] BTR 341, 345. 34 TA 1988, s 202A(1)(a); see also ICAEW Memorandum TR759, (1989) Simon’s Tax Intelligence 716. 35 ITEPA s 18(1)(a) and (b) TA 1988, s 202B(1), added by FA 1989, s 37(1); for origins, see Keith Committee, Report on Enforcement of Revenue Powers, Cmnd 8822 (1983), 141–5. 36 Contrast the position in sch D, cases I and II (TA 1988, s 74(j)). 37 ITEPA s 686, ex TA 1988, s 203A. 38 ITEPA s 18(1)(c), ex s 202B(1)(c)–(e), (2), (3) the term director is defined in s 18(3) (ex 202B(1)(5), (6)) (whether or not that office or employment is the directorship). 39 ITEPA s 17, ex s 202A(2). 40 Ibid, s 17(2). 41 Ibid, s 17(3). 42 ITEPA s 19; ex s 202B(6). 43 ITEPA ss 29–32 largely repeat ss 15–19. 44 For example, Drummond v Collins [1915] AC 1011, 6 TC 525. 45 [1926] AC 289, 10 TC 247. See also IRC v Miller [1930] AC 222, 15 TC 25; IRC v Leckie (1940) 23 TC 471. An under-deduction of a director’s PAYE which is accounted for to the Revenue by the employer is taxed under ITEPA s 223 TA 1988, s 164 (on which, see Revenue, sch E Manual, paras 3230 et seq). 46 Jaworski v Institution of Polish Engineers in Great Britain Ltd [1951] 1 KB 768, [1950] 2 All ER 1191. But, cf Jennings v Westwood Engineering Ltd [1975] IRLR 245. Tax-free remuneration for directors is now prohibited by Companies Act 1985, s 311; on definition of ‘director’, see Companies Act 1985, s 741 and compare TA 1988, s 168. 47 Richardson v Worrall [1985] STC 693, 58 TC 642 (query whether this will not be so if the primary liability and the primary benefit are the employer’s). 48 (1935) 19 TC 531. 49 For a doubt about the gardens, see Lord Evershed MR, in Wilkins v Rogerson (1961) 39 TC 344, 353. 50 By concession this rule does not apply to the heating, lighting, cleaning and gardening costs of certain clergymen (ESC A61). 51 [1960] 3 All ER 173, 39 TC 256. Today the scheme will not succeed if E comes within part 3 ch 10 (ex TA 1988, s 154); the payment will be taxable under s 212 and cannot be treated as exempt under s 331 as scholarship income. See also Constable v FCT (1952) 86 CLR 402. 52 ITEPA s 237, ex TA 1988, s 197A. 53 Weston v Hearn [1943] 2 All ER 421, 25 TC 425. 54 Denny v Reed (1933) 18 TC 254. See ESC A22. 55 Laidler v Perry [1965] 2 All ER 121, 42 TC 351. On Christmas parties, see ESC A70; the limit of £75 per head is regarded as modest. 56 Bird v Martland [1982] STC 603, 56 TC 89. Payments for suggestion schemes are, in practice, governed by ESC A57. 57 (1925) 9 TC 297, Rowlatt J See also Radcliffe v Holt (1927) 11 TC 621. 58 [1920] 1 KB 500, 7 TC 372. 59 Cowan v Seymour was distinguished in Shipway v Skidmore (1932) 16 TC 748 and in Patrick v Burrows (1954) 35 TC 138, but was, surprisingly, followed in IRC v Morris (1967) 44 TC 685 where the Court of Session held that there was evidence to support the Commissioners’ findings. ITEPA s 403, TA 1988 s 148 applies only to payments ‘in consequence of the termination of the office’ and so not here. 60 Owen v Pook [1969] 2 All ER 1, 45 TC 571; see also Donnelly v Williamson [1982] STC 88, 54 TC 636 Reimbursement of car parking expenses when the parking space is at or near the place of work is not taxable ITEPA s 237 (TA 1988, s 197A, added by FA 1988, s 46(4), (5)). 61 See Lord Simon (dissenting) in Taylor v Provan [1975] AC 194, 218, 49 TC 579, 615; and Evans [1988] BTR 362. 62 Thus, in Richardson v Worrall [1985] STC 693, 58 TC 642 a reimbursement of the cost of petrol obtained for private use was taxable; but in Donnelly v Williamson (above at n 59) a reimbursement of a teacher’s costs for doing something outside the contract of service (attending a parents’ evening) was not taxable. 63 Perrons v Spackman [1981] STC 739, 55 TC 403. 64 Turton v Cooper (1905) 5 TC 138. 65 Ball v Johnson (1971) 47 TC 155 (not taxable even though the bank required the employee to take A bankers examination); however, the payment is viewed by the Revenue as coming within ITEPA s 201 TA 1988, s 154 if the employee is paid at a rate of £8,500 p.a. or higher (ICAEW Memorandum TR786, Simon’s Tax Intelligence 1990, 205. 66 Calvert v Wainwright [1947] 1 All ER 282, 27 TC 475; on Revenue practice, see Simon’s Tax Intelligence 1984, 187 and Simon’s Tax Intelligence 1985, 187. 67 [1947] 1 ALL ER 282, 283, 27 TC 475, 478. £10 would now be worth £438 using the figures at §17.1.2. 68 Wright v Boyce [1958] 2 All ER 703, 38 TC 167, CA; and Laidler v Perry [1966] AC 16, [1965] 2 All ER 121, 42 TC 351. In the latter case a company gave each of its employees a £10 voucher at Christmas, regardless of their rate of remuneration or personal circumstances; this replaced the traditional Christmas turkey which, for some reason, could not be obtained. A senior employee earning more than £2,000 a year thought the payment a charming Christmas gesture rather than as a payment for services, but this did not prevent the vouchers from being taxable under s 62. 69 ITEPA s 324, ex ESC A70. 70 Moorhouse v Dooland [1955] ch 284, 304, 36 TC 1, 22. 71 Laidler v Perry [1966] AC 16, 35, 42 TC 351, 366, per Lord Hodson; and see Brightman J in Moore v Griffiths [1972] 3 All ER 399, 411 (employer’s gift; third party’s gift). If the company had, in return for their payment, used the footballer’s name to advertise their products that payment would have been taxable under schedule D, case VI. Query whether allowing one’s receipt of a gift to be used for advertisement will not also fall within sch D, case VI. 72 Hence, the difference between the wage and the benefit in Seymour v Reed and the £10 tip in Calvert v Wainwright. See also Lord Denning MR in Laidler v Perry [1965] ch 192, 199, 42 TC 351, 361. 73 Herbert v McQuade [1902] 2 KB 631, 4 TC 489. 74 [1909] AC 104, 5 TC 347. 75 ‘It may appear startling that those who on a particular Sunday—and that one of the most significant in the Christian year—contribute to the collection in their church, should be rendering unto Caesar nearly half their contributions, but so undoubtedly it is’ (per Lord Evershed in Moorhouse v Dooland [1955] ch 284, 299); Whitsun gifts to the curate are also taxable (Slaney v Starkey [1931] 2 KB 148, 16 TC 45). 76 Seymour v Reed [1927] AC 554, 569, 11 TC 625, 653, per Lord Phillimore. 77 Corbett v Duff [1941] 1 KB 730, 740, 23 TC 763, 779, per Lawrence J. 78 Blakiston v Cooper [1909] AC 104, 107, per Lord Loreburn. 79 [1927] AC 554, 11 TC 625. 80 For his performance see John Wisden’s Cricketer’s Almanack 1920. 81 This is a question of fact and proof: see esp Lord Phillimore at [1927] AC 554, 572, 11 TC 625, 655. 82 [1955] ch 284, [1955] 1 All ER 93, 36 TC 12. 83 Corbett v Duff [1941] 1 All ER 512, 23 TC 763. 84 [1955] ch 289, 298, per Lord Evershed MR. 85 [1972] 3 All ER 399. 86 Ibid, 411; query whether this meant that recurrence was not foreseeable for these players. 87 Where the payment is made in return for an undertaking the effect of which is to restrict the employee as to his conduct or activities, the payment may be taxable under ITEPA s 225, ex TA 1988, s 313 (see below at §14A.6.5). 88 See, eg Lord Greene MR in Wales v Tilley (1942) 25 TC 136, 142. 89 Pritchard v Arundale [1971] 3 All ER 1011, 1022, 47 TC 680; followed in Vaughan-Neil v IRC [1979] STC 644, [1979] 3 All ER 481, 54 TC 223. 90 [1971] 3 All ER 1011, 47 TC 680. 91 [1971] 3 All ER 1011, 1022, 47 TC 680, 687. 92 Query how substantial these really are. 93 [1983] STC 1, 56 TC 165; see also Curran v MNR [1959] CTC 416. 94 Jarrold v Boustead [1964] 3 All ER 76, 781, 41 TC 701, 704. 95 [1964] 3 All ER 76, 41 TC 701. 96 [1968] 1 All ER 314, 44 TC 481. 97 Cf the signing on payment in Cameron v Prendergast [1940] AC 549, [1940] 2 All ER 35. 98 Lord Denning MR in Jarrold v Boustead [1964] 3 All ER 76, 80, 41 TC 701, 729. 99 [1971] 3 All ER 1011, 1023c. Curiously, this point was not emphasised in Glantre Engineering Ltd v Goodhand [1983] STC 1. 100 [1987] STC 60, [1987] 1 All ER 916, CA. 101 [1991] STC 88, 95, 64 TC 78, 111. 102 [1991] STC 88, 94, 64 TC 78, 108. 103 [1987] STC 60 at 69. 104 Mairs v Haughey [1993] STC 569, 66 TC 273, 347 HL; for critical comment, see Ward [1994] BTR 77. 105 [1992] STC 495, CA NI. 106 [1993] STC 569, 66 TC 273, HL. 107 [1993] STC 569, 579j, 66 TC 273, 346. 108 [1995] STC 18, 67 TC 223. 109 [1972] 3 All ER 333, 48 TC 482. 110 FA 1950, s 16. The purpose of backdating the section for some of the payments 34(4)(a) was to catch payments made to the managing directors of Austin and Morris Motor Companies. See Sabine, A History of Income Tax, 116. 111 [1943] 1 All ER 46, 25 TC 33. 112 [1979] STC 644, [1979] 3 All ER 481. 113 ITEPA s 225(3), ex TA 1988, s 313(1), as substituted by FA 1988. 114 TA 1988, s 313(2), as originally enacted. 115 FA 1988, s 73. Before 1988 the payment was often non-deductible because of the decision of the Court of Appeal in Associated Portland Cement Manufacturers Ltd v Kerr [1946] 1 All ER 68, 27 TC 103; see below at §22.5.2. 116 If the compensation takes the form of annual payments it will be taxable as income under sch D, case III (Asher v London Film Productions Ltd [1944] KB 133, [1944] 1 All ER 77). See also Taxation Commr (Victoria) v Phillips (1937) 55 CLR 144. 117 TA 1988, ss 309, 579; the authority for being taken into account under ss 403, 148 is ss 309(3), 580. 118 Statement of Practice SP 1/94. 119 ITEPA s 310, ex TA 1988, s 589A. 120 ITEPA s 331 121 In Dale v de Soissons 32 TC 118, 126. 122 Ibid, 127. 123 Tilley v Wales [1943] AC 386, [1943] 1 All ER 280, 25 TC 136; see discussion in Report of the Committee on the Taxation Treatment of Provisions for Retirement, Cmd 9063 (1954) (the Tucker Report), paras 265–9. See also Woodhouse in Tolley’s Tax Planning 1999–2000, 1723–1748. 124 Tilley v Wales [1943] AC 386, 392, 25 TC 136, 149. 125 Mairs v Haughey [1993] STC 569; for critical comment, see Ward [1994] BTR 77. 126 Mairs v Haughey [1993] STC 569, HL (see above p 232). 127 Allan v IRC [1994] STC 943. 128 See Henley v Murray [1950] 1 All ER 908, 909, 31 TC 351, 363. 129 It is hard to find clear authority for this, but it may be implicit in Henley v Murray; it is certainly inconsistent with the words used by Vinelott J in Williams v Simmonds [1981] STC 715. See also Woodhouse, above p 1728, who points out that the Revenue will scrutinise the payments to see whether they are really payments in lieu of notice and so taxable. 130 See discussion of Hofman v Wadman (1946) 27 TC 192 in Henley v Murray 31 TC 351; and comments by Stamp J in Clayton v Lavender (1965) 42 TC 607. 131 EMI Group Electronics Ltd v Coldicott [1999] STC 803. 132 [1950] 2 All ER 460, 32 TC 118, CA. 133 [1950] 2 All ER 460, 462, 32 TC 118, 127. See also Henry v Foster (1931) 16 TC 605. 134 [1981] STC 715, 719, 55 TC 17, 22; for criticism, see Wosner [1982] BTR 121. 135 [1991] STC 88, 64 TC 78; on the Court of Appeal decision, see Macdonald and Kerridge [1990] BTR 313 and 315, respectively. 136 , 133 Mairs v Haughey [1993] STC 569; Carter v Wadman (1946) 28 TC 41. In Tilley v Wales (below) the House of Lords was relieved of the task of deciding whether an apportionment should be made since this has been agreed between the parties. 137 , 134 This was left open by the Court of Appeal in Shilton v Wilmshurst [1990] STC 55, 64 TC 78. 138 In Henley v Murray (above), however, Lord Evershed had distinguished the abrogation of an agreement from its modification. 139 (1932) 16 TC 605. The Special Commissioners decided in favour of the taxpayer, as did Rowlatt J and three members of the House of Lords; all three members of the Court of Appeal and two members of the House of Lords decided in favour of the Revenue. 140 This is emphasised in the explanation of Hunter v Dewhurst in Cameron v Prendergast [1940] 2 All ER 35, 23 TC 122. 141 [1943] 1 All ER 280, 25 TC 136. 142 The sum paid was £40,000, but this was apportioned between the loss of pension rights and the reduction in salary. 143 Cameron v Prendergast [1940] 2 All ER 35, 23 TC 122; Tilley v Wales [1943] 1 All ER 280, 25 TC 136; Leeland v Boarland [1946] 1 All ER 13, 27 TC 71; Bolam v Muller (1947) 28 TC 471; Holland v Geoghegan [1972] 3 All ER 333, 48 TC 482. 144 Duff v Barlow (1941) 23 TC 633 and Tilley v Wales (above) appear to be the only reported cases in which Hunter v Dewhurst has been applied, but in the former Cameron v Prendergast (above) was not cited. Lord Woolf refused to express any opinion in Mairs v Haughey 66 TC 273, 348. 145 For example, Sir Raymond Evershed MR in Henley v Murray [1950] 1 All ER 908, 911, 31 TC 351, 366. 146 [1984] STC 223, [1984] 1 All ER 1092, 58 TC 110. 147 (1935) 19 TC 444. 148 For 1998 reformulation, see [1998] BTR 420; on reporting requirements (see SI 1999/70). 149 Defined in s 402 as anything that would be a taxable emolument of the employment if received for the employment or would have been chargeable but for an earnings only exemption. For pre-1988 law on provision of a car as part of the package, see George v Ward [1995] STC (SCD) 230. 150 ITEPA s 403(1) TA 1988, s 148(1), sch 11, as rewritten by FA 1998 and replacing former ss 148, 188. 151 Nichols v Gibson [1994] STC 1029, 68 TC 611. 152 ITEPA s 401(1) TA 1988, sch 11, para 2. 153 S 401(4), ex s 148(4); at one time it was tied to the year on termination. For 1996–1998 see Inland Revenue Press Release, 17 March 1997, (1997) Simons Weekly Tax Intelligence 381. 154 S 401(1) Ibid, sch 11, para 2. 155 S 401(4) Ibid, sch 11, para 14(1). On liability of personal representatives of employee, see s 403(5). sch 11, para 14(2). 156 S 403(3) Ibid, s 148(4). 157 Ibid, s 406 sch 11, para 3; see Horner v Hasted [1995] STC 766, 67 TC 439. 158 Ibid, ss 407, 409–412 TA 1988, sch 11, paras 4–6. 159 Statement of Practice SP 13/91, as amplified by a note from the Law Society, 7 October 1992, (1992) Simon’s Tax Intelligence 869. 160 ITEPA s 413, ex TA 1988, sch 11, paras 9–11. On the need to define a place of service, see Wienand v Anderton [1977] STC 12, 51 TC 570. 161 S 408 Statement of Practice SP 2/81. 162 S 415, ex TA 1988, sch 11, para 12. On loans, see s 416, ex sch 11, para 13. 163 S 404, ex sch 11, paras 7, 8. |
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