Baird v Williams
| Jurisdiction | England & Wales |
| Judgment Date | 11 May 1999 |
| Date | 11 May 1999 |
| Court | Chancery Division |
Chancery Division.
Laddie J.
The taxpayer appeared in person.
Bruce Carr (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment.
Fitzpatrick v IR Commrs (No. 2); Smith (HMIT) v Abbott TAXWLR[1994] BTC 66; [1994] 1 WLR 306
Lomax (HMIT) v Newton WLR[1953] 1 WLR 1123
Brown v Bullock (HMIT) WLR[1961] 1 WLR 1095
Income tax - Income and Corporation Taxes Act 1988Sch. E - Clerk to general commissioners - Requirement that clerks provide office and staff for purposes of carrying out the duties of employment - Taxpayer purchased properties with mortgage finance - Part of the properties used for the purposes of his employment as clerk - Whether proportion of mortgage interest deductible from emoluments of employment - Income and Corporation Taxes Act 1988 section 198Income and Corporation Taxes Act 1988, s. 198.
This was an appeal by the taxpayer against a decision of a special commissioner that no part of mortgage interest paid in respect of properties used partly for the purpose of his employment as clerk to the general commissioners was deductible from the emoluments of that employment.
The taxpayer was clerk to the general commissioners for four divisions in the New Forest. At the time when he was appointed in 1966 he was in practice as a solicitor in Christchurch, where he had the storage and facilities and staff necessary for the performance of his clerking duties.
In 1968 the taxpayer disposed of his practice and undertook consultancy work from his home, where he was able to provide the facilities needed for his employment as clerk. However, in about 1980, he moved to Malta and had to make other arrangements, purchasing a succession of three properties over a period between 1982 and 1987, each of which he used partly as offices and partly as a pied-à-terre. All three purchases were financed by mortgages. The inspector allowed 75 per cent of the running costs of the premises as deductible expenses but disallowed any part of the interest payments on the mortgages.
The taxpayer contended that it was an objective requirement of his employment, specified by the Association of Clerks to the General Commissioners for Great Britain, that he should maintain an office. Rent would have been deductible and the payment of mortgage interest should also be deductible as an expense wholly, exclusively and necessarily incurred for the purposes of his employment.
Held, dismissing the taxpayer's appeal:
1. It was not a natural and normal consequence of the taxpayer's employment that he was obliged to borrow money to purchase a building. Even if there had been a finding of fact that on balance the relative commercial benefits of paying mortgage interest outweighed the payment of rent, the taxpayer could not have succeeded. Borrowing money was not an expense "necessarily" incurred for the performance of the duties of a clerk to the general commissioners within Income and Corporation Taxes Act 1988 section 198s. 198 of the Income and Corporation Taxes Act 1988: Fitzpatrick v IR Commrs; Smith (HMIT) v Abbott TAX[1994] BTC 66 applied.
2. The expenditure of interest was not "exclusively" for the purposes of the taxpayer's employment. Its purpose was also to provide a pied-à-terre and to assist the taxpayer to acquire a capital asset.
By originating motion pursuant to the Taxes Management Act 1970 section 56ATaxes Management Act 1970, s. 56A (as amended by SI 1994/1813) with effect from 1 September 1994, the taxpayer, Ian E Baird, appealed to the High Court against the following decision of a special commissioner (Mr DA Shirley) released on 8 May 1997.
1. Mr Ian E Baird ("the taxpayer") appeals against the rejection by the inspector of taxes of his claim to deduct under Income and Corporation Taxes Act 1988 section 198s. 198 of the Income and Corporation Taxes Act 1988 mortgage interest paid by him on moneys borrowed to purchase and improve properties used successively in part for residential purposes and in part for the purposes of the taxpayer's duties as clerk to the general commissioners for the four divisions of New Forest West, Poole, Wimborne and New Forest East for the years from 1984-85 to 1988-89 inclusive.
2. The taxpayer's emoluments are charged to tax under Income and Corporation Taxes Act 1988Sch. E. He holds an office. He is appointed by the general commissioners and he holds his office during their pleasure; Taxes Management Act 1970 section 3s. 3 of the Taxes Management Act 1970.
3. Income and Corporation Taxes Act 1988 section 198 subsec-or-para (1)Section 198(1) of the Taxes Act reads as follows:
198(1) If the holder of an office or employment is necessarily obliged to incur and defray out of the emoluments of that office or employment the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform those duties, or otherwise to expend money wholly, exclusively and necessarily in the performance of those duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed.
4. The taxpayer conducted his own appeal and gave evidence elaborating on a statement of agreed facts.
5.1 The taxpayer is a solicitor and also a notary public. He is also an associate of the Institute of Taxation, having been admitted as such in 1963. At the time he was first appointed in 1966 he was also a sole practitioner under the name or style of Baird and Fogarty at Christchurch where there were premises and staff and the necessary facilities for the performance of his duties.
5.2 In or around 1968 the taxpayer disposed of his practice and undertook consultancy work with the local solicitors of a type which would avoid the conflict of interest between his duties as a clerk and his practice as a solicitor, which had by then become apparent on several occasions. After the disposal of the practice, the clerking duties were carried out from his private residence at which he was able to provide all necessary facilities.
5.3 In or around 1980, following concern for his health, the taxpayer gave up consultancy, married and moved his home to Malta, where it remains, namely, 53 St Andrew Road, St Julians. This, like his previous home in the UK, is a substantial abode.
5.4 In an agreed document produced by the Association of Clerks to the Commissioners of Taxes for Great Britain, the "Duties of Clerks to the Commissioners" are set out in 25 paragraphs on one sheet of paper. I need not rehearse...
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Johnstone and Others
...for an officer to live in any particular house to perform any relevant duties– emphasis supplied.[57] In Baird v Williams (HMIT) TAX[1999] BTC 228, Mr Baird was the Clerk to the General Commissioners of Income Tax in Dorset. However, his home was in Malta. He owned a succession of propert......