Commissioners of Inland Revenue v Miller
| Jurisdiction | England & Wales |
| Judge | Lord Buckmaster,Viscount Dunedin,Lord Warrington of Clyffe,Lord Tomlin,. |
| Judgment Date | 06 February 1930 |
| Judgment citation (vLex) | [1930] UKHL J0206-2 |
| Docket Number | No. 4. |
| Court | House of Lords |
| Date | 06 February 1930 |
[1930] UKHL J0206-2
House of Lords
Lord Buckmaster.
Viscount Dunedin.
Lord Blanesburgh.
Lord Warrington of Clyffe.
Lord Tomlin.
After hearing Counsel, as well on Monday the 26th, as on Tuesday the 26th, days of November last, upon the Petition and Appeal of The Commissioners of Inland Revenue of Somerset House, Strand, in the County of London, praying That the matter of the Interlocutor set forth in the Schedule thereto, namely an Interlocutor of the Lords of Session in Scotland, of the First Division, sitting as the Court of Exchequer, of the 7th of July 1928, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Interlocutor might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of the Honourable Lady Miller, 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 His Majesty the King assembled. That the said Interlocutor, of the 7th day of July 1928, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Determination of the Special Commissioners of Income Tax, thereby Reversed, be, and the same is hereby, Restored except in so far as it deals with the wages of the foresters: And it is further Ordered, that the said Cause be, and the same is hereby, remitted back to the Court of Session in Scotland, to do therein as shall be just and consistent with this Judgment: And it is further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellants, the Costs of the Action in the Inner House of the Court of Session and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the parties entitled to the same within one calendar month from the date of the certificate thereof, the Court of Session in Scotland, or the Lord Ordinary officiating on the Bills during the Vacation, shall issue such summary process or diligence for the recovery of such Costs as shall be lawful and necessary.
My Lords,
The circumstances that have given rise to this appeal are special and need to be summarised in order that the point at issue may be made plain.
Sir James Miller, by a trust disposition and settlement dated December 4th, 1901, directed his trustees to hold his lands and estates at Manderston in the County of Berwick to pay all duty and burdens and the cost of repair and maintenance and in the event of his death without issue to "allow his said wife to occupy and possess during her lifetime free of rent or taxes both landlord's and tenant's), the said mansion-house of Manderston and offices and furniture and other effects therein, and the game on his said lands of Manderston and others, and the other subjects of which he had directed his said wife to have the liferent in the event of his death survived by a daughter: And he directed his trustees during the liferent of his said wife to pay the wages of the foresters employed in connection with the said establishment, the wages of the gamekeepers and gardeners to be paid by his said wife."
Sir James Miller died in 1906 without issue, and Lady Miller by virtue of her rights under the trust disposition occupied and possessed the mansion house and lands at Manderston during the year ending April 5th, 1920. For the said year the assessments under Schedule A. and B. of the Income Tax Acts were as follows:—
| £ | s. | d. | |||
| "Policy Parks, Schedule A. | … | … | 165 | 10 | 0 |
| Policy Parks, Schedule B. | … | 452 | 0 | 0 | |
| Part farm, Briery Hill, Schedule B. | … | 89 | 5 | 0 | |
| Mansion-house, Schedule A. | … | … | 319 | 10 | 0" |
No question arises as to the liability in respect of the Briery Hill subjects which were rented by Lady Miller from the trustees.
The trustees under the authority, above set out, of the trust disposition and settlement, paid the following sums during the said year out of income received by them:—
| £ | s. | d. | |||||
| Forester's Wages | … | … | … | … | 60 | 0 | 0 |
| Rates on Mansion House | … | … | … | 65 | 0 | 0 | |
| Rates on Policy Parks | … | … | … | … | 32 | 0 | 0 |
In assessing Lady Miller for super-tax for the year ending April 5th, 1921, none of the items above-mentioned under Schedules A. and B. were included, nor any of the above payments, and an additional assessment was made for that purpose. Against such additional assessment, Lady Miller appealed to the Commissioners for Special Purposes who rejected her appeal, but on further appeal to the Court of Session she was more successful, for they reversed the decision of the Commissioners, Lord Morison dissenting, and from their Interlocutor of 7th July, 1928, the Commissioners of Inland Revenue have come before this House.
That the original assessments for income tax under Schedules A. and B. were correct was not originally disputed, though it is doubted by the Lord President, but it is urged that Lady Miller's right to occupy is no part of her income and that its equivalent in money value cannot be regarded for super-tax.
This argument has found favour with the Court of Session, but their judgments are in part influenced by decisions some of which do not bind this House in part by the consideration of whether Lady Miller's interest was that of a life rent, and partly by the view on more general grounds that her interest was not income, while in Lord Blackburn's opinion in determining liability to super-tax "the question must always be whether the right of occupation gives the occupier any right to earn money from the subjects." I will reserve for the present the consideration of the various cases; it is well to examine this matter in the first place apart from their assistance.
The discussion as to whether the rent of the Respondent can properly be called a life rent does not appear to me to help the solution and it is unfortunate that the special case defined the question under this head. It is not the name by which the estate is described that matters, nor its legal incidents except so far as they are relevant for the purpose of determining whether they are such as to involve the liability in dispute. Fortunately the case was argued on the broader basis in the Court of Session though its more limited aspect received closer attention than in the circumstances it required.
The real question is whether the assessable value of the property in question is to be regarded as income for the purposes of the tax.
So far as Schedule A. is concerned the matter but for the Lord President's judgment seems reasonably plain. The tax is charged upon "hereditaments and heritages in the United Kingdom for every twenty shillings of the annual value thereof." As Lord Morison points out, it is not a tax upon the interests of the person in possession but it is charged on and payable by the occupier for the time being and he according to his interest bears or passes it on by deduction pro tanto from the rent he pays.
In the present case that the Respondent was the occupier and was consequently chargeable under the Statute with the tax, though doubted by the Lord President, is found in the words of the special case "she did in fact occupy and possess the house for the year in question" and that she was entitled to have the taxes paid by the trustees does not affect her position in this respect. Her occupation was in her own right and she was not occupying as the representative of the trustees. This being so, the next question is whether the annual value of the house is to be brought into computation for purposes of super-tax. The determination of income for this purpose is, as is well known, to be "estimated in the same manner as the total income from all sources is required to be estimated in a return made in connection with any claim for a deduction from assessable income," and the "income arising from the ownership of lands shall be deemed to be the annual value thereof estimated in accordance with the rules applicable to Schedule A."
Now in the case of a person occupying his own house, the annual value is income for purposes of the Act. If he occupies under a beneficial lease the difference between the rent he pays and the annual value is again his income and must be included in his supertax return, Commissioners of Inland Revenue v. Fargus, 10 Tax Cas. 665, and this not because he could let or sublet it, for, under a beneficial lease, he might be subject to an absolute unqualified restriction against letting or assigning which until recent legislation would have deprived him of any means of obtaining income from the property without his landlord's consent. The same position would result if without the intervention of trustees a house was devised by will to the use of a named beneficiary until he conveyed let or otherwise parted with the right to possession thereof and upon the happening of such event or on his death whichever first occurred the house was devised to some other beneficiary.
Unless it can be said that in such a case no one is liable for the tax the liability must fall on the first devisee during his interest although he cannot make any profit out of it. Nor can the intervention of trustees alter the position of the beneficiary or devisee. If authority were needed for this view it is to be found in Johnstone v. MacKenzie, 1912 A.C. 743. Again even where trustees are legal owners not in...
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