Commissioners of Inland Revenue v Aken
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE PARKER,SIR GEORGE WALLER |
| Judgment Date | 18 May 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0518-5 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 90/0477 |
| Date | 18 May 1990 |
[1990] EWCA Civ J0518-5
Lord Justice Fox
Lord Justice Parker
Sir George Waller
90/0477
Case No. 1984 I. 2875
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR PIERS ASHWORTH Q.C.)
(Sitting as a Deputy Judge of the Queen's Bench Division)
Royal Courts of Justice,
MR IAN MACDONALD Q.C. and MR T. OWEN (instructed by Messrs. Bond & Partners) appeared on behalf of the Appellant.
MR ANDREW THORNHILL Q.C. (instructed by the Solicitor, Inland Revenue) appeared on behalf of the Respondents.
This is an appeal by the taxpayer, Marie Aken, from a decision of Mr Piers Ashworth, Q.C., sitting as a Deputy Judge of the Queen's Bench Division, whereby he ordered summary judgment under Order 14 for payment to the Commissioners of Inland Revenue of the sum of £58,000—odd in respect of income tax and interest thereon.
For some years until 1983 the appellant was a prostitute; her earnings from prostitution were substantial and they came to the attention of the Revenue in about 1980, partly in consequence of a television programme in which she appeared and spoke of her earnings.
The years of assessment with which we are concerned are as follows:
| Years of Assessment | Disposal |
| 1973/74, 1975/76, 1976/77, 1977/78, 1978/79, 1979/80 and 1981/82 | Appealed against and determined by written agreement by an exchange of letters between the Inspector and the appellant's accountants under Section 54 of Taxes Management Act 1970. |
| 1982/83 | Appeal pending. Claim is for non-postponed tax agreed under Section 55(7) of Taxes Management Act 1970. |
When the Statement of Claim was delivered in this case, the appellant wrote a letter, which was treated as her defence. She objected that the sums assessed did not take into account her outgoings; but her main contention was that if she was living on immoral earnings, the taxation of those earnings meant that the Crown would be living on immoral earnings as well. That contention, in a more elaborate and sophisticated form, remains largely her defence.
The Deputy Judge considered two questions:
(1) In the events which occurred, is the appellant entitled, in collection proceedings in the present case, to rely upon the contention that the profits of prostitution are not chargeable to tax?
(2) If the appellant is entitled to rely upon such a defence, is it a good defence in law?
The Judge answered "yes" to the first question and "no" to the second. The result is that the appellant has no defence to the Order 14 proceedings, and judgment was accordingly entered for recovery of the £58,000—odd to which I have already referred.
I turn to the first question considered by the Judge: Can the defence be raised at all? All the assessments except those for 1980/81 and 1982/83, were dealt with by an agreement under Section 54 of the Taxes Management Act 1970. By subsections (1) and (2) it is provided:
"(1) Subject to the provisions of this section, where a person gives notice of appeal and, before the appeal is determined by the Commissioners, the inspector or other proper officer of the Crown and the appellant come to an agreement, whether in writing or otherwise, that the assessment or decision under appeal should be treated as upheld without variation, or as varied in a particular manner or as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was cone to, the Commissioners had determined the appeal and had upheld the assessment or decision without variation, had varied it in that manner or had discharged or cancelled it, as the case may be.
"(2) Subsection (1) of this section shall not apply where, within thirty days from the date when the agreement was come to, the appellant gives notice in writing to the inspector or other proper officer of the Crown that he desires to repudiate or resile from the agreement".
It is common ground that in respect of the six years to which I have referred, the Inspector and the appellant agreed assessments of the amounts upon which tax is now sought to be recovered. These agreements were made on behalf of the appellant by her accountants. No notices under sub-section (2) repudiating or resiling from the agreement were made in respect of any of those agreements. Thus, by Section 54, the like consequences ensued for tax purposes as if the Commissioners had determined the appeals and upheld the assessments in the amounts agreed.
As to the appeals procedure in regard to tax assessments, Section 29(1) of the Taxes Management Act 1970 provides:
"Except as otherwise provided, all assessments to tax shall be made by an inspector.………
Subsection (6) of the Section provides:
"After the notice of assessment has been served on the person assessed, the assessment shall not be altered except in accordance with the express provisions of the Taxes Acts".
Section 31(1) provides:
"An appeal may be brought against an assessment to tax by a notice of appeal in writing given within thirty days after the date of the notice of assessment."
Normally the appeal which is permitted by that provision is to the General Commissioners, but in certain cases which are specified in the statute the appeal will be to the Special Commissioners.
Section 50(6) provides:
"If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or by affirmation, or by other lawful evidence, that the appellant is overcharged by any assessment, the assessment shall be reduced accordingly, but otherwise every such assessment shall stand good."
Section 56 provides for an appeal from the Commissioners to the High Court by way of Case Stated upon a question of law, and by subsection (6) it is provided:
"The High Court shall hear and determine any question or questions of law arising on the case, and shall reverse, affirm or amend the determination in respect of which the case has been stated, or shall remit the matter to the Commissioners with the opinion of the Court thereon, or may make such other order in relation to the matter as to the Court may seem fit".
Provisions are included in Section 56 for appeal to the Court of Appeal and, with leave, to the House of Lords.
Section 46(2) provides:
"Save as otherwise provided in the Taxes Acts, the determination of the General Commissioners or the Special Commissioners in any proceedings under the Taxes Acts shall be final and conclusive."
The words "save as otherwise provided" I take to be a reference to the Section 56 provisions for appeal by way of Case Stated to the High Court.
Section 68 provides:
"(1) Any tax may be sued for and recovered from the person charged therewith in the High Court as a debt due to the Crown, or by any other means whereby any debt of record or otherwise due to the Crown can, or may be at any time, be sued for and recovered……."
The view of the Judge was this: the Revenue contend that the appellant's earnings as a prostitute are taxable as profits of a trade under Case 1 of Schedule D. He was of the opinion that if such earnings were not the earnings of trade, then the Inspector was acting ultra vires in assessing the earnings at all.
As to the agreement reached between the Revenue and the appellant acting by her accountant, the Judge said that could not confer on the Inspector any power which he did not otherwise have. He said: "…it is not stated in the Taxes Acts that the profits of prostitution are not taxable, but Mr Macdonald submits that is the effect of the words used, and in my judgment he is entitled to raise that defence in these proceedings and I must consider it". The Judge then proceeded to consider that matter and he decided against the appellant.
The Revenue submit that the appellant is not entitled, in these collection proceedings, to raise the question of the validity of the assessment.
The first question we have to decide is: what is the effect of the agreement under Section 54 of the Act, to which I have referred, disregarding, for the moment, any consequences of the fact that the receipts in question were derived from prostitution. The agreement was an agreement within Section 54(1) of the Taxes Management Act 1970; the same consequences therefore ensue as would have ensued if, at the time of the agreement made, the Commissioners had determined the appeals by varying or otherwise dealing with the assessments in the manner agreed.
It is true that, strictly, the agreement cannot have all the same consequences as would have ensued from a determination by the Commissioners, because the taxpayer could not (having agreed under Section 54) ask for a case to be stated for the decision of the High Court. However I find it difficult to believe that Parliament did not intend, so far as practicable and bearing in mind that the appeal is not being proceeded with, that the agreement would not have the full force and effect of a determination in like terms by the Commissioners. In my view the provisions of Section 54(1) do not make sense on any other basis. The section must be given a sensible meaning in the context in which it is operating.
The significant consequence, for present purposes, is that Section 46(2) of the Taxes Management Act 1970 applies, which provides:
"Save as otherwise provided in the Taxes Acts, the determination of the General Commissioners or the Special Commissioners in any proceedings under the Taxes Acts shall be...
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