Carter (HM Inspector of Taxes) v Sharon
| Jurisdiction | England & Wales |
| Judgment Date | 19 March 1936 |
| Date | 19 March 1936 |
| Court | King's Bench Division |
NO. 993-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax, Schedule D - Foreign possessions - Remittance basis - New resident - When income is "first received" in United Kingdom - Allowance out of foreign income to daughter resident in United Kingdom - Gift completed abroad - Remittance of allowance to donee by donor's agent abroad - Assessability of donor - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule D, Case V, Rule 2, and Miscellaneous Rule 1; Finance Act, 1926 (16 & 17 Geo. V, c. 22), Section 29 (1).
(1) The Respondent, who was domiciled in America, owned American investments which had remained substantially unvaried since 1919. She was in England in 1919 and again in 1927-28; on each occasion she received remittances of income from the American investments but was not chargeable to Income Tax as a person residing in the United Kingdom. She was, however, so chargeable for the year 1928-29, during which year also income from the investments was remitted to her in this country.
She was assessed to Income Tax under Rule 2 of Case V of Schedule D for the year 1928-29 on the basis of the amount of income remitted to her in that year. On appeal to the Special Commissioners it was contended on her behalf that she was assessable for the year 1928-29 on the basis of the amounts remitted to her in the preceding year, and the Special Commissioners allowed her appeal.
(2)The Respondent had for many years made voluntary allowances out of the income from the American investments to her daughter, who had resided in the United Kingdom since 1909.
Before leaving America in 1928 the Respondent instructed her agent there, who had authority to draw on her Californian banking account into which the income from the investments was paid, to pay a certain sum monthly to her daughter. The agent made such a payment in January, 1928, posting in California to the daughter a banker's draft drawn on a London bank to the order of the daughter and purchased with a cheque drawn by him on the Californian bank account.
The Respondent was assessed by additional assessment under Rule 2 of Case V of Schedule D for the year 1928-29 in respect of the amount so remitted to her daughter. On appeal to the Special Commissioners it was contended on her behalf that the sum remitted to the daughter ceased to belong to the Respondent before the banker's draft left America and therefore was not income of the Respondent remitted to the United Kingdom; evidence was given that under Californian law the property in the sum to be remitted and the draft representing it passed to the daughter, and that the gift to her was complete and irrevocable at the latest when the banker's draft was posted in California. The Special Commissioners allowed the appeal.
Held, that the Special Commissioners' decision on both points was correct.
Timpson's Executors v. Yerbury (20 T.C. 155)distinguished on the second point.
Stated under the Income Tax, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 23rd July, 1934, Mrs. Louise Tevis Sharon (hereinafter called the Respondent) appealed against the following assessments to Income Tax made upon her, namely:-
(a) an assessment in the sum of £12,000 for the year ending 5th April, 1929, and
(b) an additional assessment in the sum of £816 for the year ending 5th April, 1929.
2. The assessment in the sum of £12,000 was made upon the Respondent under Case V of Schedule D to the Income Tax Act, 1918, and is in respect of monies remitted from America and received by the Respondent in the United Kingdom under the circumstances hereinafter set out.
3. The Respondent is an American citizen domiciled in America. She is a widow.
4. For many years the Respondent has possessed stocks and shares in America from which income arises. From 1919 onwards these stocks and shares have remained substantially unvaried.
5. In the year 1919 the Respondent came to the United Kingdom and remained here from May to September of that year. During her visit to the United Kingdom income from the aforesaid stocks and shares was remitted to her from America to the extent of approximately $12,000.
6. In February, 1928, the Respondent again came to the United Kingdom with the intention of visiting her daughter, Lady Fermor-Hesketh, but it is agreed that she was not resident in the United Kingdom in the year ended 5th April, 1928. Soon after her arrival she was taken ill and has been unable to return to America.
7. From February, 1928, to 5th April, 1928, there was remitted to the Respondent about £820 out of the income arising from the stocks and shares referred to in paragraph 4 hereof.
8. The Respondent was resident in the United Kingdom during the year ending 5th April, 1929, and in that year there was remitted to her from America approximately £9,840.
9. The Respondent admits that she is assessable to Income Tax in respect of sums remitted to her from America, but contends that for the year ending 5th April, 1929, she is assessable in the sum of £820, that is to say, the income remitted to and received by her in the year preceding the year of assessment.
10. It is contended on behalf of the Crown that the Respondent is assessable in respect of the whole of the whole of the sums received in the United Kingdom during the year of assessment, that is to say, £9,840.
11. The case of Back v. Whitlock, 16 T.C. 723, was referred to.
12. Having considered the arguments and evidence adduced before us, we were of opinion that the principle laid down in the case ofBack v. Whitlock applied and we accordingly reduced the assessment to £820.
13. The additional assessment in the sum of £816 was made upon the Respondent under Case V of Schedule D and is in respect of a sum of money received in the United Kingdom by the Respondent's daughter, Lady Fermor-Hesketh, under the circumstances set forth in the following paragraphs of this Case.
14. Up to and including the year ending 5th April, 1928, the Respondent was resident in the United States of America. In 1909 the Respondent's daughter, who until that time lived with the Respondent, married Sir Thomas Fermor-Hesketh and since her marriage she has resided in the United Kingdom.
15. From 1900 the Respondent made voluntary allowances annually to her said daughter, and after the marriage of her daughter these allowances were continued, the money being remitted to Lady Fermor-Hesketh in the United Kingdom out of income from the stocks and shares referred to in paragraph 4 of this Case.
16. Before leaving America for the United Kingdom (as stated in paragraph 6 of this Case) in February, 1928, the Respondent instructed her financial agent in America to pay to Lady Fermor-Hesketh the sum of $4,000 per month as and for a voluntary allowance. This sum was the same amount as the Respondent while herself in America had been in the habit of allowing to her daughter.
17. The income arising in America from the Respondent's stocks and shares in that country is paid...
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