Carson (Inspector of Taxes) v Cheyney's Executor
| Jurisdiction | England & Wales |
| Judge | Viscount Simonds,Lord Morton of Henryton,Lord Reid,Lord Tucker,Lord Keith of Avonholm |
| Judgment Date | 25 November 1958 |
| Judgment citation (vLex) | [1958] UKHL J1125-1 |
| Date | 25 November 1958 |
| Court | House of Lords |
[1958] UKHL J1125-1
House of Lords
Viscount Simonds
Lord Morton of Henryton
Lord Reid
Lord Tucker
Lord Keith of Avonholm
Upon Report from the Appellate Committee, to whom was referred the Cause Carson (Inspector of Taxes) against Cheyney's Executor, that the Committee had heard Counsel, as well on Monday the 27th, as on Wednesday the 29th, days of October last, upon the Petition and Appeal of Gilbert Carson, of 1 Westmoreland Road, Bromley, Kent, (one of Her Majesty's Inspectors of Taxes), praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 21st of October 1957, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of Peter Cheyney's Executor lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 21st day of October 1957, in part complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The question for your Lordships' determination is whether the Commissioners for the General Purposes of the Income Tax, Mr. Justice Harman and the Court of Appeal were all wrong in holding that the Respondent, who is the executor of a well known writer of detective fiction known as Peter Cheyney, is not assessable to income tax under Schedule D in respect of royalties which were received by him as such executor under contracts made by Peter Cheyney during his lifetime.
I will summarise the facts as they appear in the Case Stated by the General Commissioners and the annexed documents.
Peter Cheyney was a writer by profession and he carried on his profession, as writers often do, by entering into contracts with publishers under which, in return for royalties of varying amounts, the copyright in his works became vested in them. These contracts, which were numerous, took various forms. In some cases, notably in a contract made with Faber & Faber Limited relating to a work described as "Provisionally Entitled 'Making Crime Pay'", the work in question had not yet been written or at any rate not completed at the date of the contract. In others the work had been completed and there was therefore an existing copyright in it. In one case which has been regarded as demanding special consideration the contract took the form of a licence to translate an existing work into French. Subject to what may be said about the last mentioned contract, I do not think that any distinction can validly be made between any of the contracts. In all of them the author carried on his profession by exploiting his work in the usual way. A writer might, I suppose, carry on his profession without doing so, but the Income Tax Acts contemplate the carrying on of a profession for gain and that is what Peter Cheyney did. He was accordingly assessed during his lifetime under Case II of Schedule D in respect of the royalties so received by him after deducting therefrom all proper and allowable expenses of carrying on his profession. There is no doubt that he was rightly so assessed, and the learned Attorney-General very properly admitted that he could not lawfully have been assessed under any other Case of any other Schedule. It must be recorded also that he was consistently assessed upon a form of receipts basis, being credited with royalties upon the day when they fell due for payment and no account being taken of the present value of royalties due at a future date.
Peter Cheyney died on the 26th June, 1951. Royalties falling due under the several contracts after his death were received by his executor, and upon him first and additional assessments were made under Schedule D for the years 1951- 52 and 1952-53 in the sums of £10,000 and £18,000 respectively. The question is whether they were rightly made. The executor also received sums in respect of contracts made by him with publishers after Peter Cheyney's death and admitted his liability to assessment in such sums. He may have been right or wrong in doing so. That question has not been in dispute nor have your Lordships seen the contracts. The matter is irrelevant to the present issue.
The assessments for 1951-52 are governed by the Income Tax Act, 1918, and those for 1952-53 by the Act of 1952, but there is no material difference between the relevant provisions of the two Acts. It is enough, therefore, to refer to section 123 of the 1952 Act under which income tax is chargeable under Case III of Schedule D in respect of "any interest of money, whether yearly or otherwise, or any annuity, or other annual payment," under Case V "in respect of income arising from possessions out of the United Kingdom" and under Case VI in respect of any annual profits or gains not falling under any of the Cases I to V and not charged by virtue of Schedules A, B, C or E.
It was not stated in the assessments under which of the Cases of Schedule D they were made, and I understand that it is not considered necessary to do so. Before the Commissioners and before the Courts below it was contended that they were properly made under Case III or, alternatively, under Case VI. Before this House Case V was also invoked, but in the view which I take nothing turns on this.
My Lords, it was inevitable that a large part of the argument should turn on a recent decision of this House in which two of your Lordships and I took part, the Respondent contending that it governed the present case, the Appellant that it was distinguishable. I refer to Stainer's Executors v. Purchase [1952] A.C. 280. In that case I said that I agreed with and adopted every word of the judgment of Lord Justice Jenkins in the Court of Appeal, and I repeat what I then said in regard to the judgment of the Court of Appeal delivered by the same Lord Justice in the present case. I therefore absolve myself from the need to compare at length the facts of the two cases and will state as shortly as I can the facts and the principles which appear to emerge from the earlier decision.
Stainer's case, as I will call it, was concerned with assessments made upon the executors of Stainer, a professional film actor and producer (who went by the name of Leslie Howard), in respect of payments made to them under contracts for the exploitation of films to the making of which Leslie Howard had given his professional services as actor or producer or director. The payments consisted of percentages or shares of the profits of exploitation. During his lifetime he was assessed under Case II, his receipts in respect of all his professional activities being brought into account against his proper expenses of carrying on his profession. After his death further payments were made to his executors under the same contracts. It was not suggested that anything further had to be done to earn these payments. They were the reward for Leslie Howard's professional services rendered during his lifetime. It was, however, contended on behalf of the Crown, just as it has been contended in the present case, that they had after the death of Leslie Howard acquired a new taxable quality and, as they were no longer assessable under Case II since no profession was being carried on, were assessable under Case III or Case VI. This contention was decisively rejected. Lord Justice Jenkins said:
"… I think it is equally clear that the assessment to tax of the profits of a profession under Case II of Schedule D down to the date of discontinuance is to be taken as covering all remuneration earned in the course of such profession whether received prior to or after such discontinuance and that, the liability to tax being thus exhausted so far as remuneration is concerned, nothing which is in truth remuneration so earned can afterwards be charged to tax merely because the mode of ascertaining and paying it is such that it might have been charged to tax under some other Case if it had not been remuneration so earned."
In a speech, in which the other Members of the House concurred. I expressed the same view with equal emphasis and less felicity. The principle which emerges is clear. Payments which are in historical fact (I adopt the language of the late Lord Asquith of Bishopstone in the same case) exclusively the fruit or aftermath of professional activities do not change their taxable character when the profession is discontinued.
But there was another aspect of Stainer's case which is relevant to the present case. Perhaps it is no more than a different way of stating the same point. It was urged that the contracts made by Leslie Howard were "income bearing assets" and that the payments made to his executors were the income of such assets. To this the same noble Lord gave an answer which I venture to quote, so completely does it dispose of a similar argument in the present case. "The contracts", he said, "in the present case enjoy, in my view, no such independent vitality. The consideration for what Mr. Howard was to do—to act or manage—was not the grant of a contract or contracts...
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