Avery Jones v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 12 March 1976 |
| Date | 12 March 1976 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax, Schedule D-Foreign income-Double taxation relief-United States dividends-Recipient resident in United Kingdom-Recipient having dual nationality-Whether recipient a citizen of United Kingdom and so not entitled to exemption under Double Taxation Agreement-Double Taxation Relief (Taxes on Income) (U.S.A.) Order 1946 (S.R. & O. 1946 No. 1327), Sch., arts. II(1)(g) and (3) and XV; Double Taxation Relief (Taxes on Income) (U.S.A.) Order 1966 (S.I. 1966 No. 1188), Sch., art. 11.
The Appellant was the administrator of the English estate of the deceased, who died in December 1969, having been a citizen of the United States at all material times. On 1 January 1949 the deceased, being then married to a British subject, automatically acquired citizenship of the United Kingdom and Colonies by virtue of s. 12(5), British Nationality Act 1948. The deceased received trust income comprising dividends and interest from the United States in the years 1966-67 to 1969-70 inclusive, upon which United States tax was paid. A claim was made on behalf of the Appellant for exemption from United Kingdom income tax for the relevant years under article XV of the Double Taxation Agreement between the United Kingdom and the United States of 1946, as amended by the 1966 protocol, whereby dividends and interest paid by a corporation of one Contracting Party were exempted from tax by the other Contracting Party "except where the recipient is a citizen, resident or corporation of that other Contracting Party". For many years, including the relevant ones, the deceased had been resident in the United Kingdom for United Kingdom tax purposes, although by virtue of her American citizenship and the decision in Lord Strathalmond v. Commissioners of Inland Revenue48 T.C. 537; [1972] 1 W.L.R. 1511 she was not a "resident of the United Kingdom" within the definition contained in article II of the 1946 Double Taxation Agreement. The claim was rejected by the Commissioners of Inland Revenue and the Appellant appealed to the Special Commissioners contending (i) that the deceased had not been a citizen of the United Kingdom and (ii) that the expression "citizen (resident or corporation) of that other Contracting Party" in article XV referred only to a citizen of the United States and not to a British subject; furthermore that the expression was not reciprocal so far as it concerned citizens because the term "citizen" of the United Kingdom was unrecognised in the laws of the United Kingdom. It was contended on behalf of the Crown that the deceased had been a citizen of the United Kingdom, and that accordingly she was not entitled to the exemption claimed. The Special Commissioners accepted the Crown's contention.
Held, that the decision of the Special Commissioners was correct. The protocol of 1966 uses the concept of citizenship of the United Kingdom to refer to citizenship of the United Kingdom and Colonies.
Stated under the Taxes Management Act 1970, s. 56, by the Commissioners for the Special Purpose of the Income Tax Acts for the opinion of the High Court of Justice.
(i) At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 14 February 1975 John Francis Avery Jones as administrator of the English estate of Mrs. Muriel Elizabeth Grant Rowley, deceased (hereinafter called "the administrator" and "the deceased" respectively) appealed against the refusal of a claim for exemption under article XV of the Double Taxation Agreement between the United Kingdom and the United States of America (S.R. & O. 1946 No. 1327, as amended by S.I. 1955 No. 162, S.I. 1958 No. 1571 and S.I. 1966 No. 1188), hereinafter referred to as "the Double Taxation Agreement" in respect of the deceased's income for the years of assessment 1966-67 to 1969-70.
(ii) The claim had been made by Messrs. Bircham & Co., a firm of solicitors in which the Appellant was one of the partners, but the formal refusal of the claim by the Commissioners was expressed to relate to a claim by Major Rowley (who had in fact by that time disclaimed responsibility for the deceased's unpaid tax under s. 41, Income and Corporation Taxes Act 1970) in respect of his deceased wife's income for the four years in question.
2. Shortly stated, the questions for our decision were:
(a) whether the deceased, being a citizen of the United Kingdom and Colonies, was a "citizen…of that other Contracting Party", that is the United Kingdom, for the purposes of the Double Taxation Agreement; and
(b) whether certain trust income received by the deceased as life tenant was in her hands "dividends and interest paid by a corporation of one Contracting Party", that is, the United States of America, or whether the trusts were of the type considered in Garland v.Archer-Shee 15 T.C. 693(1).
Both parties to the appeal invited us to determine only the first question and to give thereon a decision in principle because the second question might in a certain eventuality not arise and its determination (turning on disputed questions of American Trust Law) would involve considerable expense. Each party also gave notice that, in the event of our decision going against him and he deciding to take the matter further, he would require us to state a Case for the opinion of the High Court on the first question without our giving a final determination of the appeal before us. To meet the convenience of the parties and to save expense we agreed to hear the appeal on this basis.
3. The following documents were proved or admitted before us:
(2) 2 April 1973-Letter from Bircham & Co. to H.M. Inspector of Taxes, Penrith, being the claim for exemption.
(3) 18 March 1974-Letter from the Secretaries' Office, Inland Revenue, to Bircham & Co. refusing the claim for exemption.
(4) 9 April 1974-Letter from Bircham & Co. to the Secretaries' Office, Inland Revenue, giving notice of appeal against the refusal of the claim.
(5) 16 April 1974-Letter from H.M. Inspector of Taxes, Penrith, to Bircham & Co. stating the reasons for the Board's refusal of the claim.
(6) Copies of these letters are available for the Court if required.
4. The following facts were admitted between the parties:
(2) The deceased, Muriel Elizabeth Grant Rowley, late of Glassonby Lodge, Glassonby, Cumberland, died on 16 December 1969 leaving an American will and in due course letters of administration with the will annexed were granted to John Francis Avery Jones, now of 190 Fleet Street, London, as attorney of the United States Trust Co. of New York out of the Principal Probate Registry on 15 May 1971.
(3) The deceased was a citizen of the United States at all material times.
(4) In 1935 the deceased married Major Guy Shafto Rowley, who was a British subject. The deceased thereby automatically became a British subject and on 1 January 1949 she acquired citizenship of the United Kingdom and Colonies by virtue of s. 12(5) of the British Nationality Act 1948. She did not renounce this status.
(5) The deceased was tenant for life under three American trusts. Between 6 April 1966 and her death she received the income of those trusts which consisted of dividends and interest paid by United States corporations as defined in the double taxation agreement. Those corporations were not at the material times residents of the United Kingdom as defined in the double taxation agreement.
(6) At all material times the deceased was resident in the United Kingdom for the purposes of United Kingdom tax and not resident in the United States for the purposes of United States tax. By virtue of her citizenship of the United States the deceased was not a "resident of the United Kingdom" as defined in the double taxation agreement (seeLord Strathalmond v. Commissioners of Inland Revenue(1) 48 T.C. 537).
(7) The deceased was, by virtue of her citizenship of the United States, liable to United States tax on her income and, by virtue of her United Kingdom residence, liable to United Kingdom tax on her income, subject to the exemption claimed in this appeal.
(8) An extract from Vol. 8 of Income Taxes Outside the United Kingdom 1972 (published by Her Majesty's Stationery Office), at page 60, in the section dealing with the United States of America reads:
Scope of the Tax. 4. Income charged: (1) General: The Code contains no single charging provision defining the scope of the tax, but the effect of the provisions imposing and fixing the rates of tax (paragraph 14) and defining "gross income" (subparagraph (2) following) and "taxable income" (paragraph 6(3)), together with those dealing with particular classes of taxpayers such as non-residents, may be summarised in general terms as follows: (a) Individuals who are citizens of the United States are taxable on their income from all sources, irrespective of its place of origin and their place of residence.
5. It was contended on behalf of the Appellant that:
(2) the Appellant was not a citizen of the United Kingdom either for the purposes of the double taxation agreement or under the domestic legislation of the United Kingdom;
-
(3) the expression "citizen…of that other Contracting Party" in article XV referred only to a citizen of the United States (a concept recognised by the
taxation legislation of the United States) and not to a British subject: where the double taxation agreement referred to British nationality it used the expressions "British subject" (see article X) or "national" (see article XXI); (4) the expressions "citizen" and "citizen of the United Kingdom" were unknown both to United Kingdom domestic taxation laws and to all other laws of the United Kingdom; United Kingdom laws referred...
To continue reading
Request your trial
-
Commissioners of Inland Revenue v Commerzbank AG IRC v Banco do Brasil SA
...J Berwin & Co) for the banks. The following cases were referred to in the judgment: Avery Jones (Rowley's Administrator) v IR Commrs TAX(1976) 51 TC 443 Fothergill v Monarch Airlines Ltd ELR[1981] AC 251 Great West Life Assurance Co v US 678 S 2d 180; 82-1 US Tax Cas (CCH) 9374 IR Commrs v ......
-
Avery Jones (Rowley's Administrator) v Commissioners of Inland Revenue
...consequence. Walton J.-Very well, dismissed with costs. [Solicitors:-Speechly Bircham; Solicitor of Inland Revenue.] 1 Reported [1976] 2 All E.R. 898; [1976] S.T.C. 290. 1 [1931] A.C. 212. 1 [1972] 1 W.L.R. 1511. 1 [1972] 1 W.L.R. 1511 1 [1931] A.C. 212. 2 48 T.C. 537, at p. 543. 1 48 T.C. ......