Albon v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 31 July 1998 |
| Date | 31 July 1998 |
| Court | Court of Session |
Court of Session (Inner House).
Lord Johnston, Lord Kirkwood and Lord Caplan.
Dr Albon appeared in person.
Stephen E Woolman (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Aspin v Estill (HMIT) TAXTAX[1987] BTC 553; 60 TC 549
Bray (HMIT) v Best TAXWLR[1989] BTC 102; [1989] 1 WLR 167
Colquhoun v Brooks ELR(1889) 14 App Cas 493
IR Commrs v Willoughby TAXWLR[1997] BTC 393; [1997] 1 WLR 1071
Oppenheimer v Cattermole (HMIT) ELR[1976] AC 249
Income tax - Income and Corporation Taxes Act 1988Sch. D - Foreign pensions - Taxpayers in receipt of US and French retirement pension payments - Payments as a result of contributions from taxed income - Whether liable to UK tax - Income and Corporation Taxes Act 1988 section 18Income and Corporation Taxes Act 1988, s. 18.
This was an appeal by the taxpayers, Dr Albon and his wife, against a decision of a special commissioner that pension payments made to them by the US and the French governments were taxable under Income and Corporation Taxes Act 1988Case V of Sch. D.
Dr Albon, who was born in the UK, worked in the US from 1960 to 1964 and in France from 1978 to 1984, and was non-resident in those two periods. He was resident in the UK from 1984. When in the US he paid Federal and State security taxes in order to obtain social security benefits. While in France, he paid French social security contributions.
In the years of assessment, 1989-90 to 1993-94, Dr Albon and his wife received payments from both the US and French social security administrations, and were assessed to income tax under Case V of Sch. D:Income and Corporation Taxes Act 1988 section 18s. 18of the Income and Corporation Taxes Act 1988.
Dr Albon contended that tax had been paid on the contributions made in France and the US. If they had been resident in France or the US they would not be taxed on the payments, so to tax the payments in the UK would amount to double taxation. He also contended that the payments were "deferred pay", to be regarded as emoluments provided by his employer, on which tax had already been paid, since the contributions came out of taxed income.
Held, dismissing the taxpayers' appeal:
1. The right to a pension stemming from contributions paid by an employee under the US scheme could not be regarded as an emolument of the employment.
2. The right to payment of both pensions, once it had arisen, constituted a "possession out of the United Kingdom" withinIncome and Corporation Taxes Act 1988Case V of Sch. D:Aspin v Estill (HMIT) TAX[1987] BTC 553 followed.
3. Assessment to tax on pension payments received by the UK-resident taxpayers was correct. There was no question of double taxation. Relief for double taxation was concerned with the consequences of an assesment, not its validity.
By originating summons pursuant to the Taxes Management Act 1970 section 56ATaxes Management Act 1970, s. 56A (as substituted by SI 1994/1813SI 1994/1813 with effect from 1 September 1994), the taxpayers appealed to the Court of Session against the following decision of a special commissioner (Mr TG Coutts QC) released on 9 September 1997.
1. The taxpayers appeal against assessments to income tax for the years 1989-90 to 1993-94 inclusive. I am asked to give a decision in principle. In each of the appeal years the taxpayers, being resident in the UK, received payments from foreign sources. The question is whether the payments made to the taxpayers are, by virtue of social security contributions made in the US and France chargeable to income tax underIncome and Corporation Taxes Act 1988Case V of Sch. D.
2. In this matter, because of the volume of correspondence and the various threads of argument disclosed in the taxpayers' papers, directions were given by a special commissioner in August 1996. The directions were not fully complied with but the deficiencies were made good in the course of the hearing before me. In particular in August last year the appellant, Dr Albon, was somewhat coy about his actual residence and the nature of the payments made to him by the French authorities. The situation eventually became reasonably clear, however, in the course of cross examination.
3. A document with agreed facts was produced and this was supplemented by the documents produced and some oral evidence given by Dr Albon. In his attitude and presentation Dr Albon gave the impression that his view was that the whole matter, including the hearing, was an opportunity to score points against and to tease the authorities.
4.1. I find the facts to be as follows. Dr Albon was born in the UK in 1923. He pursued a scientific career and worked in the US from 1960 to 1964 and in France from 1978 to 1984. His wife has resided in the UK since 1964 and Dr Albon since 1984. He did not return to the UK for any period in excess of 183 days in those years.
4.2. He worked at two institutes in the US, the first in Pittsburgh, Pennsylvania, the second in Columbus, Ohio.
4.3. When in the US he paid Federal State and Federal social security taxes. The Federal social security taxes were not deductible unlike certain state taxes, in an individual's tax returns. Federal social security tax was a payment to the Federal authorities in order to obtain the benefits of social security. One of those benefits was a retirement pension. Social security benefits received did not require to be declared in the individual's tax return.
4.4. When in France Dr Albon paid French social security contributions for employment at the Université Paris Sud and other locations.
4.5. In the years of assessment payments were made from the social security administration in the US and from the Caisse Nationale d'Assurance Vieillesse des Travailleurs (CNAVT) in France.
4.7. These payments have been remitted to a "general bank account" operated by the taxpayers in France on which interest is earned and from which drawings can be made.
4.8. The payments in question have accordingly been treated as income by the taxpayers.
4.9. It having come to the notice of the Revenue authorities that such payments were being made to the taxpayers who are UK residents, assessments were made thereon under Income and Corporation Taxes Act 1988Case V of Sch. D to the Income and Corporation Taxes Act 1988.
5. Upon...
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