Doyle v Davison
| Jurisdiction | Northern Ireland |
| Judgment Date | 01 January 1962 |
| Date | 01 January 1962 |
| Court | Queen's Bench Division (Northern Ireland) |
HIGH COURT OF JUSTICE, NORTHERN IRELAND (QUEEN'S BENCH DIVISION)-
Income Tax, Schedule E - Benefit in kind - Director in occupation of company's house - Repairs carried out by company - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), Sections 160, 161 and 162.
The Respondent lived in a house owned by the company of which he was managing director. Under an oral agreement he paid an annual rent of £110, this being equal to the net Schedule A assessment. He also paid the rates. There was no agreement concerning repairs but the whole of their cost was in fact borne by the company. The Schedule A assessment was made upon the company as immediate lessor, under the rules applicable to Schedule A assessments in Northern Ireland.
In assessments to Income Tax made upon the Respondent under Schedule E for the years 1957-58 and 1958-59, amounts of £412 and £142, respectively, were included in respect of the expense of certain repairs as benefits in kind chargeable under Part VI, Chapter II of the Income Tax Act, 1952.
On appeal to the Special Commissioners, the Respondent contended that for the purpose of Chapter II the expense incurred in the provision of the benefit was limited to the notional rent provided by Section 162 (3) and that the sums spent by the company on repairs should accordingly be disregarded. The Special Commissioners allowed the appeal.
Held, that the sums spent by the company on repairs were properly assessable on the Respondent.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice in Northern Ireland.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held in Belfast on 21st June, 1960, Mr. Alexander Davison (hereinafter called "the taxpayer") appealed against the following assessments under Schedule E as managing director of Grove Weaving Co., Ltd.:
1957-58 |
An additional assessment on £562. |
1958-59 |
A first assessment on £3,824. |
Included in the said additional assessment for 1957-58 is a sum of £412 which H.M. Inspector of Taxes regarded as a benefit properly chargeable on the taxpayer under Schedule E under the provisions of Sections 160, 161 and 162 of the Income Tax Act, 1952; and included in the said assessment for 1958-59 is a sum of £142 which H.M. Inspector of Taxes regarded in the same light. The sole question for our determination was whether the said sums of £412 and £142 were correctly included in the Schedule E assessments.
2. There was read to us an agreed statement of facts as follows:
(2) The taxpayer is, and at all times material to the appeal was, the managing director of Grove Weaving Co., Ltd. (hereinafter called "the company"), a private company registered under the Companies Act (Northern Ireland), 1932, and carrying on business as manufacturers of linen, cotton and rayon goods at Grove Street East, Belfast. The business was founded in 1896 by two brothers, Messrs. W.J. and T.D. Paul. (A copy of the company's memorandum and articles of association is attached to this Case, marked Exhibit "A" (1).)
(3) On 21st January, 1957, the company purchased, for £5,125, from Mrs. Mary D. Paul, widow of the said T.D. Paul, a large dwelling-house at Dunmurry, Co. Antrim, called "Dunmurry House". (A copy of a conveyance dated 21st January, 1957-Mary D. Paul and others to Grove Weaving Co., Ltd.- is attached to this Case, marked Exhibit "B" (1).) The property is subject to two small rents totalling £6 18s., which are paid by the company.
(4) The circumstances in which the company bought "Dunmurry House" were these: Mrs. Paul, an elderly lady and the last surviving member of the Paul family, approached the taxpayer and told him that she had decided to give up the house as a residence as it was too big for her. She also told him that she did not want it to pass into the hands of strangers and, as the taxpayer had been for many years connected with her family in business, she asked him to buy it. At the time, the taxpayer was living in a house, No. 7, Malone Hill Park, Belfast, owned by the company; and, though he had no particular desire to move to "Dunmurry House", he did, in order to oblige Mrs. Paul and because her family had helped him greatly in business, propose that the company should sell 7, Malone Hill Park, and buy "Dunmurry House". This proposal was in fact carried out.
(5) In the company's financial year ended 31st March, 1958, and prior to the taxpayer's going into occupation of "Dunmurry House" in April, 1957, the company spent £775 8s. 10d.in repairs, alterations and additions to the property, which was old and was in a poor state of repair. Shortly after he had gone into occupation, and in the same financial year, the company spent an additional £412 1s. 4d. on repairs to the property-the latter sum being one of the two items in dispute in this appeal. (Details of this expenditure are set out at paragraph 1 on a sheet attached to this Case, marked Exhibit "C" (1).) For the purposes of computing the company's profits, the Inspector agreed with the company that the expenditure referred to above should be divided between capital and income in the manner set out in Exhibit "C", the expenditure of £412 1s. 4d. under "income" being allowed against the company's earnings.
(6) In the tax year to 5th April, 1959, the company spent further sums on "Dunmurry House", namely, £343 4s. 11d. which the Inspector agreed to treat as capital expenditure, and £142 5s. 8d. which he treated as chargeable to income. The latter sum is the second of the two items at issue in this appeal, and it represents work done on one of the outhouses at "Dunmurry House", namely, a servant's cottage. (For details, see paragraph 2 in Exhibit "C".)
(7) In addition to the expenditure on repairs in the two years above-mentioned, the company paid the wages of a gardener employed at "Dunmurry House". In the tax year ended 5th April, 1958, the wages were £331, and in the year ended 5th April, 1959, £337 15s. 8d. It also conferred certain other benefits on the taxpayer, e.g., in the use of a car belonging to the company.
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(8) In accordance with an oral arrangement with the company, the taxpayer pays an annual rent of £110 to the company for "Dunmurry House", this being the amount of the Schedule A assessment on the company for the house. The taxpayer also pays all rates on the house.
(9) An additional assessment of £562 has been made on the taxpayer for the year 1957-58, in which is included the £412 1s.4d. referred to at paragraph (4) above. The assessment upon him for the year 1958-59 is £3,824, and includes the sum of £142 5s. 8d. referred to at paragraph (5) above. The Inspector has contended that these two sums are benefits properly chargeable to the taxpayer under Section 161 of the Income Tax Act, 1952. Furthermore, he has put forward this contention notwithstanding that he has already charged to the taxpayer, as a benefit in each of the two years, the Schedule A assessment of £110 on "Dunmurry House" paid by the company. Since, however, the taxpayer paid a rent of £110 in each year to the company, the Inspector has properly treated the Schedule A assessment as having been "made good" to the company by the taxpayer and, therefore, not a benefit to him. Against the Inspector's ruling that the two sums of £412 1s. 4d. and £142 5s. 8d. are chargeable as benefit under Section 161 the taxpayer now appeals.
(10) Though the company owned 7, Malone Hill Park, Belfast, from 31st December, 1949, onwards, and though the amounts set out in a sheet attached to this Case and marked Exhibit "D" (1) were spent on repairs on it by the company while the taxpayer was in occupation, no attempt was made...
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Luke v Commissioners of Inland Revenue
...So the case for adopting a secondary meaning if that is possible is overwhelming. 66Finally, I must notice the case of Doyle (H.M. Inspector of Taxes) v. Davison, 40 T.C. 140, which appears to be the only reported case dealing with this matter. There a private company bought a house for oc......