Donnelly v Williamson
| Jurisdiction | England & Wales |
| Judgment Date | 30 October 1981 |
| Date | 30 October 1981 |
| Court | Chancery Division |
Chancery Division.
Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. J.E. Holroyd Pearce Q.C. and Mr. A. Wilson (instructed by Messrs. Hugh Perce) for the taxpayer.
Before: Walton J.
Income tax - Schedule E emoluments - Teacher's travelling allowance - Rate of allowance based on estimate of mileage expenses - Travel to attend non-compulsory meetings with parents - Whether allowance subject to tax - Income and Corporation Taxes Act 1970 schedule EIncome and Corporation Taxes Act 1970 - Sch. E, Case I.
This was an appeal by the Crown from the finding of the General Commissioners that travel allowance payments received by the taxpayer were not emoluments from her employment assessable to tax underIncome and Corporation Taxes Act 1970 schedule ESch. E.
An employed school teacher received the travel allowance in dispute in respect of travel to attend out-of-school activities, in particular "Parents Evenings". Attendance at such activities was voluntary and unpaid. The amount of the allowance received was based on the application of a general formula, similar to one applying on a national level. Evidence was given before the General Commissioners as to the manner in which the mileage allowance was based.
The Crown, relying on Fergusson v. Noble, claimed that the allowance formed part of the taxpayer's emoluments. It also contended that her contract of employment as a teacher was extended to include her attendance at the extra-curricular activities and therefore she received a salary enlarged by the car allowance in respect of her extended duties.
Held, appeal dismissed.
1. The allowance was not received "for acting as an employee", as the functions attended were outside the duties for which the taxpayer was being paid as a teacher.
2. The allowance was not received "for being an employee" since, to obtain it, she had to perform duties outside her contractual duties as an employee.
3. Fergusson v. Noble is distinguishable, as here there was no more than a repayment of expenses as in Pook v. Owen, and such a repayment is not an emolument.
4. The General Commissioners had sufficient evidence before them to enable them to be satisfied that there was no element of bounty built into the rates of the allowance. The test in determining whether there is any profit element in such allowances is whether the rate is constructed in a genuine attempt to produce a mathematical equivalence with the expenditure incurred. It is not necessary to determine whether this has been achieved in each individual case.
Walton J.: Believe it or not, this appeal by the Crown is in respect of tax at the basic rate on a sum of £13, assessable in two different years. This is not merely a case of taking a sledge hammer to crack a nut; it effectively ensures that the nut itself, and a good deal more, will wholly disappear in the operation. Two excuses are offered by the Crown, the first being that the taxpayer herself (or rather, I suspect, her Union) took the matter seriously enough to instruct Leading Counsel before the General Commissioners. So be it; if they over-buttered the egg, this affords not the slightest justification for the Crown to do the same. The second justification is that this is a test case; I presume that if that is so it is fairly representative of the whole class of cases, which are thereby demonstrated to be of the smallest. Thus the wholly uncomfortable feeling is left with the public at large that the Crown spends so much time and effort persecuting minnows that it is small wonder it has no energy left to pursue the real sharks, as appears from the "Mickey Mouse" case, I.R. Commrs. v. National Federation of Self-Employed and Small Businesses ELR[1981] A.C. 93.
However, this is all by the way. I must now consider the legal - I will not abuse the word "merits" - position. The facts are of the simplest and are, as usual, set out with admirable clarity by the General Commissioners in the Case Stated, from which I take the following:
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5. On the basis of the evidence adduced before us we found the following facts admitted or proved:
(i) The taxpayer was at all material times employed by the City of Birmingham Education Department as a Teacher at Northfield School in Birmingham.
(ii) In connection with her teaching she attended certain out-of-school activities; these activities, with the exception of one Open Day in January, 1978, consisted of "Parents Evenings". It was not disputed that for the purposes of this appeal these activities were voluntary and did not form part of the duties of the taxpayer's employment which she was obliged to perform. She did not receive any salary or overtime or any other payment in respect of her attendance at these activities, but she was able to make the claims referred to in (iii) below in respect of her travel.
(iii) At all material times there was in force a scheme for the payment of travelling and subsistence allowances for teachers … The scheme comprised two distinct parts; "Part A" allowances for the payment of travelling and subsistence allowances in relation to expenses incurred while on school business in general, and "Part B" allowances for travel on other occasions including (inter alia) travel to the other out-of-school activities referred to in para. 5(ii) above. The taxpayer made claims under both Pt. A and B of the scheme. The same rates of car mileage allowance applied to both parts. All the payments which were in issue in this appeal were made under Pt. B of the scheme. The claims were made on "a particular form" and details of the activities involved are set out in Exhibit 4.
(iv) The rates of allowances under the scheme referred to in (iii) above were revised from time to time to take into account increases in costs; the purpose of the rates as revised from time to time was to reimburse the expenses incurred by the application of a formula based upon certain assumptions not all of which would have necessarily applied to each of the persons claiming reimbursement. The said rates of allowances were similar to those agreed on a national level between the English Local Authorities and NALGO; the scales so agreed were based upon A.A. figures … .
(v) During the relevant years of assessment the taxpayer was not a person to whom Finance Act 1976 section 60sec. 60 orFinance Act 1976 section 6161 of the Finance Act 1976 applied.
The two sections last referred to relate to directors of companies. I continue from the Case Stated: "6. The taxpayer, giving evidence which we accepted: (i) told us that "Parents Evenings" were not a compulsory part of her duties as a teacher and were not written into her contract...
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