Caldicott v Varty (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 22 June 1976 |
| Date | 22 June 1976 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax, Schedule E, Case II - Whether duties performed were of an office or employment under the Crown - Whether salary payable out of United Kingdom public revenue - Income and Corporation Taxes Act 1970 (c. 10), ss. 181 and 184(3)(a).
The taxpayer, a member of the Corps of Specialists under the Overseas Development Administration of the Foreign and Commonwealth Office ("O.D.A."), was assigned for a tour of 2 1/2 years to the service of the Fiji Government as Senior Assessor (Training) in the Department of Inland Revenue. His salary was paid by the O.D.A. subject to deduction of United Kingdom tax. He was also paid by the O.D.A. a tax free foreign service allowance and superannuation contributions were made by the O.D.A. on his behalf. No tax was charged on the salary by the Fiji Government. By arrangement between the Fiji and United Kingdom Governments this expenditure was in the first instance recovered quarterly by the O.D.A. through the Crown Agents from the Fiji Government; the Fiji Government in turn recovered quarterly from the United Kingdom Government, as part of a block claim, the total cost of the taxpayer's assignment less a notional local Fiji salary. At all material times the taxpayer was neither resident nor ordinarily resident in the United Kingdom, and it was common ground that his office or employment was of a public nature. On appeal to the Special Commissioners against an assessment to income tax raised on him under Case II of Schedule E for 1971-72 in respect of the salary paid to him by the O.D.A., it was contended for the taxpayer that s. 184(3)(a), I.C.T.A. 1970 (under which certain duties are treated as performed in the United Kingdom for the purposes of Case II of Schedule E), had no application because (i) the duties performed by him in the relevant year were those of an office or employment under the Fiji Government and therefore not under the Crown, and (ii) his salary was not payable wholly out of the public revenue of the United Kingdom. For the Crown it was contended that (i) the relevant office or employment was that of a member of the Corps of Specialists under the O.D.A.; (ii) alternatively, if the relevant office was under the Fiji Government it was still under the Crown within the meaning of s. 184(3)(a); (iii) the taxpayer's salary was payable out of the public revenue of the United Kingdom. The Commissioners decided in the Crown's favour and dismissed the appeal.
Held, (1) that the taxpayer remained a member of the Corps of Specialists and performed the duties of an office or employment under the Crown in the United Kingdom notwithstanding that he worked in Fiji in the service of the Fiji Government, and
(2) that his emoluments were payable out of the public revenue of the United Kingdom. Dictum of Stamp J. in Lush v. Coles 44 T.C. 169, at page 173; [1967] 1 W.L.R. 685 applied.
Stated under the Taxes Management Act 1970, s. 56, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 14 December 1973, J.D. Caldicott (hereinafter called "the Appellant") appealed against an assessment to income tax made upon him under Schedule E for the year 1971-72 in the sum of £5,548.
2. Shortly stated the question for our decision was whether having regard to the provisions of s. 184(3)(a), Income and Corporation Taxes Act 1970, the Appellant was correctly assessable to income tax under Case II of Schedule E.
3. Mr. F.E. Sitch, a Principal in that part of the Foreign and Commonwealth Office which is concerned with personnel working overseas, gave evidence before us.
4. The following documents were admitted before us:
Exhibit 1-correspondence and documents relating to the Appellant's appointment.
Exhibit 2-correspondence relating to the appeal.
Exhibit 3-a copy of the Appellant's 1972-73 return.
Exhibit 4-a copy of the Schedule E assessment appealed against.
Exhibit 1 is attached to and forms part of this Case(1).
5. The following facts were admitted between the parties:
(2) The Appellant was appointed to the Corps of Specialists for a period of six years from 20 December 1967 on the terms and conditions set out in a letter to him dated 19 September 1967 from the Ministry of Overseas Development.
(3) His first assignment as a member of the Corps was to the service of the Government of Swaziland as Collector of Income Tax.
(4) On his return from Swaziland the Appellant was assigned to the service of the Government of Fiji as Senior Assessor (Training) Department of Inland Revenue. The appointment was for a tour of 21/2 years with effect from the date of his departure to Fiji on the terms and conditions contained in a letter to him from the Overseas Development Administration (formerly known as the Ministry of Overseas Development) dated 25 November 1970.
(5) By a Savingram dated 8 December 1970 the Minister of Overseas Development notified the Fiji Government of the terms of the Appellant's assignment to its service and requested that he be given a formal letter of appointment on arrival.
(6) The Appellant left the United Kingdom for Fiji on 16 December 1970 and arrived there on 22 December 1970.
(7) Formal notification of the Appellant's appointment was given to him by the Secretary for the Public Services to the Fiji Government on 23 March 1971.
(8) The Appellant's salary for the year of assessment 1971-72 was paid to him by the Overseas Development Administration under deduction of United Kingdom income tax. No tax was charged by the Fiji Government in respect of the salary.
(9) The Appellant was neither resident nor ordinarily resident in the United Kingdom during the said year of assessment.
(10) An assessment to income tax under Schedule E for the year 1971-72 was raised on the Appellant in respect of the said salary and was appealed against on 27 February 1973.
6. As a result of the oral evidence adduced before us we find the following additional facts:
(a) In the year 1971-72 the Overseas Development Administration of the Foreign and Commonwealth Office paid the Appellant a gross salary of £5,548 from which was deducted United Kingdom income tax under the P.A.Y.E. scheme and voluntary contributions to the United Kingdom National Insurance scheme and a subscription to a staff association in the United Kingdom. That administration also paid to the Appellant in that year a Foreign Service Allowance at the rate of £880 per annum. In addition the administration also made contributions to a pension fund under special arrangements made for members of the Corps of Specialists. The Appellant's salary was paid monthly by means of a credit to his bank account in England;
(b) the Appellant's salary was charged to a suspense account in the name of the Corps of Specialists. This suspense account was funded from a vote of the Overseas Development Administration of the Foreign and Commonwealth Office provided from the Consolidated Fund. At the end of each quarter the expenditure was recovered from the Crown Agents and credited to the suspense account. (The Government of Fiji recovered quarterly from the United Kingdom Government as a part of a block claim the total cost of the Appellant's assignment less a notional local Fiji salary.)
7. The Appellant was not present or represented at the hearing before us. The following written representations by the Appellant were read to us by the Crown's representative:
My appeal is against the following assessment: 1971-72 Employment etc., £5,548. Facts. The assessment was dated the 21st February 1973. I lodged an appeal on the 27th February 1973 which was acknowledged in a letter dated the 8th March 1973 from H.M. Inspector of Taxes (Public Department 2). I am a member of the Corps of Specialists under the Overseas Development Administration of the Foreign & Commonwealth Office. I am attaching my letter of appointment dated 19th September 1967 (exhibit 1 page 1(1) ) together with "Memorandum to accompany Letter of Appointment" (exhibit 1 page 2(1) ). My first appointment was in Swaziland as Collector of Income Tax. After leave in 1970 I was assigned to Fiji in December of that year and I am attaching my letter of Appointment dated 25th November 1970 (exhibit 1 page 9(1) ). I am also attaching photostat copies of (a) the Savingram from the Minister for Overseas Development to the Government of Fiji dated 8th December 1970 concerning my assignment (exhibit 1 page 22(1) ) and (b) the letter of appointment from Fiji Government as a Senior Assessor (Training) in the Fiji Inland Revenue Department (exhibit 1 page 24(1) ). (c) page 78 of the Government of Fiji Civil List dated 31st March 1972 showing the establishment of the Inland Revenue Department (exhibit 1 page 25(1) ). I am also attaching a memorandum from The Secretary for the Public Service dated 8th May 1972 (exhibit 1 page 26(1) ) which confirms that I am filling a substantive post in the Fiji Inland Revenue Department and that a local salary of Fiji $5055 is included in the annual estimates of the Inland Revenue Department and that such salary is remitted to the United Kingdom through the Crown Agents as reimbursement of the emoluments paid to me by the United Kingdom Government. Finally I am enclosing a copy of a letter dated 1st July 1971 from the Inland Revenue Department (exhibit 1 page 27(1) ) which confirms that my employment through the O.D.A. is not regarded as constituting working for a public department. In those circumstances my duties must be in respect of an office in Fiji.
In respect of my assignment in Swaziland I successfully contended that the provisions of Section 184(3) did not apply and that the United Kingdom Revenue could not tax my emoluments under Section 181. I advanced the same grounds in respect of my...
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