Horner v Madden ;Horner v Hasted
| Jurisdiction | England & Wales |
| Judgment Date | 15 June 1995 |
| Date | 15 June 1995 |
| Court | Chancery Division |
Chancery Division.
Lightman J.
The taxpayer appeared in person.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Income tax - Income and Corporation Taxes Act 1988 schedule ESchedule E - Severance payment of £90,000 and car received by taxpayer - Whether taxable under Income and Corporation Taxes Act 1988 schedule E section 148Sch. E - Income and Corporation Taxes Act 1988, s. 148.Capital gains tax - Notice to taxpayer to deliver information in relation to capital gains - Whether taxpayer had complied with notice - Taxes Management Act 1970 section 8 subsec-or-para (1) section 12Taxes Management Act 1970, ss. 8(1)(a), 12.
These were two appeals by the taxpayer by way of case stated under theTaxes Management Act 1970 section 56Taxes Management Act 1970, s. 56.
The first appeal was against a decision of the general commissioners for Stockport confirming an assessment to capital gains tax for the year 1992-93. The second appeal was against a decision of a special commissioner confirming an assessment to income tax underIncome and Corporation Taxes Act 1988 schedule ESch. Efor the year 1988-89 in respect of payment received by the taxpayer on his retirement.
The taxpayer responded to a notice issued to him under theTaxes Management Act 1970 section 8 subsec-or-para (1) section 12Taxes Management Act 1970, ss. 8(1)(a) and 12 requiring him to deliver to the inspector information relating to capital gains arising in the year 1992-93 by providing a complicated formula by which he claimed his capital gains might be ascertained.
Held, dismissing the taxpayer's appeal:
A taxpayer was not entitled to waste the inspector's time by substituting a riddle for the information required by the notice.
For many years the taxpayer worked for a firm of chartered accountants. Although he was not qualified he had a status similar to that of the partners and his salary was calculated as a share of the firm's profits. On his retirement he received a severance payment of £90,000 and a car. The firm agreed to keep up a life policy providing cover in the sum of £192,000, and in return the taxpayer agreed that £90,000 would be paid to the firm out of the proceeds of the policy if the £192,000 became payable by reason of his death before the age of 65.
The taxpayer was assessed under the Income and Corporation Taxes Act 1988 section 148Income and Corporation Taxes Act 1988, s. 148 (Income and Corporation Taxes Act 1988 schedule ESch. E) in respect of the £90,000 and the value of the car. He claimed that any assessment should have been made under Income and Corporation Taxes Act 1988 schedule DSch. D as he was treated as a partner; that the £90,000 was a loan; and that the money and the value of the car were exempt from tax as payments on account of disability under Income and Corporation Taxes Act 1988 section 188 subsec-or-para (1)s. 188(1)(a) of the Act.
Held, dismissing the taxpayer's appeal:
1. The taxpayer, who did not have the necessary qualifications to be a partner in a firm of chartered accountants, was an employee of the firm.
2. The contingent obligation to pay the £90,000 could not alter the legal character of the payment to the taxpayer.
3. It was not established either that the taxpayer had a disability which prevented him from performing his duties, or that any disability was the employer's motive for making the severance payment.
Lightman J: Horner v Madden (HMIT)
I have before me an appeal by the taxpayer from a decision of the general commissioners confirming an assessment made on him in respect of a disposal during the fiscal year 1992-93 of certain shares in M L Laboratories Ltd and the Trustee Savings Bank.
Taxes Management Act 1970 section 8 subsec-or-para (1) section 12Sections 8(1)(a) and 12 of the Taxes Management Act1970 (as amended) provide that, for the purpose of assessing a person to capital gains tax, an inspector may by a notice given to the taxpayer require the taxpayer to make and deliver to the inspector, within the time limited by the notice, a return containing such information as may be required in pursuance of the notice.
By such a notice dated 6 April 1993, Mr Madden (the inspector of taxes) required the taxpayer to record on the tax return forming part of the notice details of all capital gains for the year ended 5 April 1993 and to return the tax return to the inspector duly signed within thirty days. The notice stated further:
You are required to give full details of all your … capital gains on which you may be charged tax (as set out in the Taxes Act).
In response, on 21 October 1993 the taxpayer filled in the form and returned it to the inspector. He spelt out that he had sold the above shares. In answer to the requirement in the form to give the amount of the chargeable gain, he wrote "see schedule (pages 1 and 2)". In the schedule he wrote:
Instead of quoting the amount of the gain I am giving you a formula from which it can be calculated.
There then followed a complicated formula and (as I understand it) the clues to working out the formula and calculating the amount. He adds:
All the figures for the letters in the formula [for which figures are to be substituted] are known to the Deputy Chairman, Mr L J H Beighton C.B.
The letter went on to set out a deeply held grudge on the part of the taxpayer against Mr Beighton.
On 24 November 1993 the inspector (disregarding this response), on the basis that the required information had not been provided, made an estimated assessment. The taxpayer then appealed to the special commissioners because the taxpayer had, in respect of various matters he had conducted for clients, complaints (well or ill-founded it is unnecessary to inquire into) in respect of the past conduct of the general commissioners. The general commissioners, however, decided in April 1994 that the appeal should proceed before the general commissioners.
At the hearing before the general commissioners the taxpayer explained (as he explained to me) that he had deliberately declined to specify his...
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