Bolam (HM Inspector of Taxes) v Muller
| Jurisdiction | England & Wales |
| Judgment Date | 05 November 1947 |
| Date | 05 November 1947 |
| Court | King's Bench Division |
NO. 1390-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax, Schedule E - Emoluments of office - Payment by company to managing director in consideration of his relinquishment of right to receive commission.
The Respondent, the managing director of a limited company, was entitled under a service agreement of 12th October, 1937, to a fixed salary and to commission based on the distributed profits of the company. Owing to a change in the company's financial policy, no dividend was paid between April, 1941, and August, 1942. By agreement of 30th September, 1942, in consideration of the payment of £1,250 as compensation, the Respondent surrendered his right to commission as from 1st November, 1940, during the continuance of the original service agreement.
On appeal against an assessment to Income Tax under Schedule E for the year 1942-43, the Respondent contended that the payment of £1,250 was made by the company to obtain a release from a future contingent liability and was not assessable to Income Tax. The General Commissioners discharged the assessment.
Held, that the payment in question was remuneration for services to be rendered and was accordingly correctly assessed to Income Tax under Schedule E.
Stated under Section 149 of the Income Tax Act, 1918, by the Commissioners for the General Purposes of the Income Tax for the Division of Copthorne and Effingham in the County of Surrey, for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the General Commissioners of Income Tax for the Division of Copthorne and Effingham in the County of Surrey, held at Court House, Epsom, Surrey, on 30th November, 1945, for the purpose of hearing appeals, Percy Maxwell Muller (hereinafter called "the Respondent") appealed against an assessment to Income Tax made upon him under Schedule E of the Income Tax Acts for the year 1942-43 in the sum of £1,060.
The assessment was an additional assessment made under the provisions of Section 45 (5), Finance Act, 1927, by reason of the Respondent having resigned his office as managing director during the year 1943-44. The amount of the additional assessment for the year 1942-43 was computed as follows :-
| Salary | £3,000 |
| Payment for additional duties | 91 |
| Additional sum, described in | |
| the agreement as compensation | 1,250 |
| £4,341 | |
| Less: First assessment | 3,281 |
| Additional assessment | £1,060 |
The question at issue was whether the Respondent was assessable to Income Tax under Schedule E in respect of the additional sum of £1,250 as being remuneration from the office which he held, and paid to him in accordance with an agreement dated 30th September, 1942, referred to below.
2. The Respondent was appointed managing director of Gillett, Stephen & Co., Ltd. (hereinafter called "the company") on 30th June, 1937. The terms of the appointment are set out in an agreement with the Respondent dated 12th October, 1937, a copy of which is annexed hereto, marked "A", and forms part of this Case(1).
The agreement (hereinafter referred to as "the 1937 agreement") appoints the Respondent as managing director for seven years from 30th June, 1937, at a fixed remuneration of £2,000 per annum and (by clause 4 (b) a commission on a scale dependent on the amount of the distributed profits of the company for each financial year or other period of the company. The salary was increased from £2,000 per annum to £3,000 per annum from 1st November, 1939, by a resolution of the directors of the company passed 9th January, 1941. The term of the 1937 agreement was extended to 1st November, 1944, by agreement dated 17th January, 1941, a copy of which is annexed hereto, marked "B", and forms part of this Case(1).
3. A small interim dividend was paid by the company in April, 1941, but as a result of a change in the company's financial policy following a change in directors' control in October, 1941, no further dividends had been paid up to August, 1942. On 12th August, 1942, the Respondent drew the attention of the board of directors to the fact that under the 1937 agreement he was entitled to a bonus based on dividends paid and that the non-payment of dividends affected his rights. After discussion he agreed to accept a sum of...
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McGregor v Randall
...181 section 183sec. 181 and 183 of the 1970 Act. For the Crown reliance was placed on authority, particularly Bolam v. Muller TAX(1947) 28 T.C. 471. In that case a sum paid to the taxpayer for surrendering his right to commission was held to be taxable. In the present case, it was argued th......
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Holland v Geoghegan
...were cited to us:Hunter v. Dewhurst TAX16 T.C. 605Prendergast v. Cameron TAXELR23 T.C. 122; [1940] A.C. 549Bolam v. Muller TAX(1947) 28 T.C. 471Henley v. Murray TAX(1950) 31 T.C. 351Bridges v. Hewitt TAXWLR37 T.C. 289; [1957] 1 W.L.R. 674Hochstrasser v. Mayes TAXELR38 T.C. 673; [1960] A.C. ......
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Holland (HM Inspector of Taxes) v Geoghegan
...were cited to us:Hunter v. Dewhurst TAX16 T.C. 605Prendergast v. Cameron TAXELR23 T.C. 122; [1940] A.C. 549Bolam v. Muller TAX(1947) 28 T.C. 471Henley v. Murray TAX(1950) 31 T.C. 351Bridges v. Hewitt TAXWLR37 T.C. 289; [1957] 1 W.L.R. 674Hochstrasser v. Mayes TAXELR38 T.C. 673; [1960] A.C. ......
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McAllister
...had the contingency, i.e. redundancy, arisen) was held not to be taxable, as it was effectively a payment for a loss. In Bolam v Muller [1947] 28 TC 471, a director surrendered his right to commission in return for a lump sum payment, which was held to be remuneration. In that judgement, At......