Bird v Martland
| Jurisdiction | England & Wales |
| Judgment Date | 28 June 1982 |
| Date | 28 June 1982 |
| Court | Chancery Division |
Chancery Division.
Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. G.R. Aaronson Q.C. (instructed by Messrs. Linklaters & Paines) for the taxpayers.
Before: Walton J.
Income tax - Lump sum payments to employees on withdrawal of cars provided by company - Whether payment an emolument of employment - Whether decision of Commissioners unreasonable on the facts -Income and Corporation Taxes Act 1970 section 181 subsec-or-para (1) schedule EIncome and Corporation Taxes Act 1970 - sec. 181(1), Sch. E.
These were two appeals by the Crown from decisions of the General Commissioners which found that sums of £2,110 received by two employees from their employer company were not assessable to income tax underIncome and Corporation Taxes Act 1970 schedule ESch. Efor the year 1976-77.
From 1968 until the end of July 1976 the employer company maintained a policy under which its middle and higher management employees were provided with hired cars. The company contributed £350 a year towards the total cost of the hire of the vehicle of the employee's choice. The employee paid any additional charges and was responsible for insurance and repairs. Both the taxpayers involved in these appeals were supplied with cars under that policy.
In January 1974 the employer company was taken over by another company which had a different policy in relation to supplying cars for employees and it was decided that the employer company's policy would be revised to bring it into line with that of the parent company. Before the cars were withdrawn three possible courses of action were considered by the company. The first was to withdraw the cars and make no recompense to the employees and the second was to give them an increase in salary. The third course, which was adopted, was to give them a lump sum. It was those lump sums which the Crown claimed were assessable to the employee recipients as sums paid to them in lieu of the continuance of a perquisite.
For the taxpayers, it was contended that the Court could not upset the finding of the Commissioners unless it was satisfied that their conclusion was unreasonable, given the primary facts which they had stated. It was also emphasised that the employees who received those payments were not obliged to remain in the company's employ for any specified time thereafter.
Held, appeals allowed.
The true analysis of what took place on the facts as found by the General Commissioners is that the employees received the lump sums because they were employees having perquisites which were going to be taken away from them. The only matter that could militate against a conclusion that the sums were paid as a perquisite of employment was the fact that the employees receiving them were not obliged to remain in the company's employ thereafter. That point is not sufficient to justify the conclusion of the Commissioners that the sums were not assessable underIncome and Corporation Taxes Act 1970 schedule ESch. E.
Walton J.: These two appeals arise out of the same general facts, and although the position of the taxpayer in each case is slightly different there is in my judgment no essential difference between them. I shall therefore deal in general with the case and the facts of Bird v. Martland, leaving Bird v. Allen to be understood as following precisely the same course.
These two appeals are appeals by the Inspector of Taxes against decisions of the Commissioners for the General Purposes of the Income Tax for the Division of Leeds, and in each case their decision was given on the 30th October, 1979. The sum in each case is the sum of £2,110, alleged by the Inspector of Taxes to be assessable to income tax underIncome and Corporation Taxes Act 1970 schedule ESch. Efor the year 1976/77.
What happened - and it is set out with admirable clarity in the Cases Stated - was this. The taxpayer in each case was an employee of Kirkstall Forge Engineering Ltd. Mr. Martland had been employed since the 31st August, 1970; Mr. Allen had been employed since the 3rd July, 1961. During the relevant year of assessment Mr. Martland was Production Control Manager, and Mr. Allen was Accounts Office Manager. In 1968 a policy decision was taken by the company to expand, and this resulted in a requirement for additional middle and upper management. The company decided that it would be necessary to offer a company car to the holders of these posts in order to improve the company's image and also to attract the right type of person.
So a scheme was formulated, the provisions of which are somewhat complicated. It was not a scheme...
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