Gubay v Kington
| Jurisdiction | UK Non-devolved |
| Judge | Lord Fraser of Tullybelton,Lord Scarman,Lord Bridge of Harwich,Lord Brandon of Oakbrook,Lord Brightman |
| Judgment Date | 26 January 1984 |
| Judgment citation (vLex) | [1984] UKHL J0126-3 |
| Date | 26 January 1984 |
| Court | House of Lords |
[1984] UKHL J0126-3
House of Lords
Lord Fraser of Tullybelton
Lord Scarman
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Brightman
My Lords,
This appeal is concerned with a claim by the Inland Revenue for capital gains tax from the appellant ("Mr. Gubay") in respect of a gift of shares made by him to his wife. Mr. Gubay's liability to the tax depends on whether Mrs. Gubay was, at the date of the gift, "a married woman living with her husband" within the meaning of the provisions of the Finance Act 1965 relating to capital gains tax. If she was, Mr. Gubay is not liable for capital gains tax on the gift. If she was not, Mr. Gubay is liable for tax on chargeable gains of some £1.4 million in respect of the gift. So far, the Inland Revenue have been successful in upholding the assessment in principle before the special commissioners, before Vinelott J. and before the Court of Appeal (the Master of the Rolls and Dillon J., with Sir Denys Buckley dissenting).
Both Mr. Gubay and his wife were resident and ordinarily resident in the United Kingdom up to 4th April 1982. On that date Mrs. Gubay ceased to be resident or ordinarily resident in the United Kingdom, and she was not so resident at any time during the year of assessment 6th April 1972 to 5th April 1973. She was absent from the United Kingdom throughout that year. Mr. Gubay continued to be resident or ordinarily resident in the United Kingdom until 28th October 1972 when he left the United Kingdom and was neither resident nor ordinarily resident here for the remainder of the year of assessment 1972-73. Between 4th April and 28th October 1972 Mrs. Gubay lived mainly in the Isle of Man, where Mr. Gubay visited her frequently. At all relevant times Mr. and Mrs. Gubay were living together in the ordinary sense of that expression. The gift of shares was made on 7th July 1972.
Capital gains tax, of the long term type with which this appeal is concerned, was introduced by the Finance Act 1965 section 19. A person is chargeable to the tax in respect of chargeable gains accruing to him in a year of assessment during "any part of which" he is resident or ordinarily resident in the United Kingdom — section 20. Mr. Gubay, having been resident in the United Kingdom for part of the year of assessment 1972-73, is in principle chargeable in respect of gains accruing during that year. Assets which are disposed of by way of gift are deemed to have been disposed of by the donor for a consideration equal to their market value — section 22(4)( a). Mr. Gubay will therefore be chargeable to tax on the gain which was realised on the disposal of the shares, unless he can rely on the exemption under paragraph 20 of Schedule 7 to the Finance Act 1965 in favour of disposals between spouses where the wife is a married woman living with her husband. That paragraph provides as follows:—
"20.—(1) If, in any year of assessment, and in the case of a woman who in that year of assessment is a married woman living with her husband, the man disposes of an asset to the wife …. both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal."
Section 45(3) of the Finance Act 1965 provides as follows:—
"(3) References in this Part of this Act to a married woman living with her husband should be construed in accordance with section 361(1)(2) of the Income Tax Act 1952."
Section 361 of the Income Tax Act 1952 has been repealed and replaced in almost identical terms by section 42 of the Income and Corporation Taxes Act 1970, which was a consolidating Act. Section 42 was the section in force during the tax year 1972-73, but I think it is simpler to refer to section 361 as if it had not been superseded. It is in the following terms:—
"361.—(1) A married woman shall be treated for income tax purposes as living with her husband unless either—
( a) they are separated under an order of a court of competent jurisdiction or by deed of separation, or
( b) they are in fact separated in such circumstances that the separation is likely to be permanent.
(2) Where a married woman is living with her husband and either—
( a) one of them is, and one of them is not, resident in the United Kingdom for a year of assessment, or
( b) both of them are resident in the United Kingdom for a year of assessment but one of them is, and one of them is not, absent from the United Kingdom throughout that year,
the same consequences shall follow for income tax purposes as would have followed if, throughout that year of assessment, they had been in fact separated in such circumstances that the separation was likely to be permanent:
Provided that where this subsection applies and the net aggregate amount of income tax (including surtax) falling to be borne by the husband and the wife for the year is greater than it would have been but for the provisions of this subsection, the [Board] shall cause such relief to be given (by the reduction of such assessments on the husband or the wife or the repayment of such tax paid (by deduction or otherwise) by the husband or the wife as [the Board] may direct) as will reduce the said net aggregate amount by the amount of the excess."
The only question is whether on 7th July 1972 Mrs. Gubay fell under the description of a married woman living with her husband if that expression is construed in accordance with section 361(1)(2) of the 1952 Act. The question can be narrowed down considerably. It is common ground, and is indeed obvious, that neither paragraph of subsection (1) of section 361 applies because Mr. and Mrs. Gubay were not separated by order of the court or by deed, nor were they in fact separated permanently or at all. So there is nothing in that subsection to prevent Mrs. Gubay being treated as living with her husband in 1972-73. It is also common ground that paragraph ( b) of subsection (2) is not applicable because one of the spouses (Mrs. Gubay) was not resident in the United Kingdom for the year of assessment 1972-73. The live issue is whether paragraph ( a) of subsection (2) of section 361 applies, on the basis that Mr. Gubay was, and Mrs. Gubay was not, resident in the United Kingdom for the year of assessment 1972-73, and, if it does apply, what consequences follow for the purposes of capital gains tax, having regard to the later provisions of subsection (2).
In the Court of Appeal Sir Denys Buckley decided in favour of Mr. Gubay on the ground that no part of subsection (2) gives any guidance as to the proper construction of the expression "a married woman living with her husband". He therefore treated the reference in section 45(3) to subsection (2) of section 361 as mere surplusage. I cannot agree with that course, for two reasons. In the first place Parliament has referred in section 45(3) not merely to section 361 but expressly to "section 361(1)(2)". Parliament must therefore have considered that it was possible to obtain guidance as to the construction of the expression from both subsections. The court is therefore, in my opinion, not entitled to dismiss the reference to subsection (2) as surplusage. Secondly, if we were to treat subsection (2) as having no bearing on the construction of the expression, we would be giving an unduly limited meaning to the word "construed" in section 45(3). It is evidently not used there in a very strict sense. Even subsection (1) of section 361 does not, strictly speaking, deal with construction; it does not provide that the expression married woman living with her husband "means" so and so, but only that a married woman shall be "treated for income tax purposes as" living with her husband unless she is separated in one of the ways there specified. By way of contrast examples of provisions for construction in the strict sense are found in section 45(2) of the Finance Act 1965 which provides in several places that a certain expression "has the meaning assigned to it" in another section. The word "construed" should, I think, be read in relation to subsection (2) in the same rather broad sense as it is in relation to subsection (1).
Subsection (2) deals with cases which are the opposite of those dealt with in subsection (1), that is to say with cases where a married woman is living with her husband in fact, and it provides that in the circumstance there mentioned "the same consequences shall follow for income tax purposes" as would have followed if they had been separated. The practical effect of that provision seems to me to be not very different from that of a provision that, in the circumstances mentioned, the woman is to be "treated for income tax purposes as" separated from her husband. Regarded in that way, subsection (2) gives just as much guidance on construction as subsection (1). I am therefore of opinion that, subject always to any effect the proviso to subsection 361(2) may have, the effect of the main part of subsection (2) is that Mrs. Gubay is to be treated for income tax purposes, and therefore also for capital gains tax purposes, as not living with her husband for the year 1972-73 because they fall within paragraph ( a) of section 361(2). Were it not for the proviso, I would therefore agree with the conclusion of Dillon L.J. on this point at [1983] 1 W.L.R. page 718 F.
I turn now to consider the proviso to subsection (2) of section 361. It has been suggested that the proviso should be disregarded, for one of two reasons. The first reason was that it was said to be excluded by the terms of section 45(3) of the Finance Act 1965. This argument derives such plausibility as it has from the unusual style in which section 45(3) has been drafted, in respect that it...
To continue reading
Request your trial
-
Rushton v Commonwealth Superannuation Corporation (No 3)
...v Scott (1987) 13 FCR 404 Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27 Gubay v Kingston (Inspector of Taxes) [1984] 1 WLR 163 Huynh v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 152 FCR 576 Main v Main (1949) 78 CLR 636 Mercer Superannuation (Au......
-
Parliamentary sovereignty and parliamentary oddity
...it is required to give effect to the intention of Parliament. A whole host of cases, such as Gubayv. kington ( Inspectorof Taxes) [1984] 1 W.L.R. 163 seem to support the presumption. 43 Taken from Gyles Brandreth, The Lawisan Ass. Pan Books, 1984, at p.126 and the ZAPU (PF) - in 1989, the n......