Inland Revenue v Morris
| Jurisdiction | Scotland |
| Judgment Date | 07 December 1967 |
| Docket Number | No. 15. |
| Date | 07 December 1967 |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
RevenueIncome taxIncome assessableSched. EEmoluments from employmentVoluntary payment by third partyIncome Tax Act, 1952 (15 and 16 Geo. VI and 1 Eliz. II, cap. 10), sec. 156, as amended by Finance Act, 1956 (4 and 5 Eliz. II, cap. 54), sec. 10 (1) and Second Sched., para. 1 (1).
Para. 1 inserted in Sched. E by sec. 10 (1) of the Finance Act, 1956, enacts:"Tax under this Schedule shall be charged in respect of any employment on emoluments therefrom and tax shall be charged in accordance with the rules stated in the Second Schedule to the Finance Act, 1956." The Second Sched. to the 1956 Act provides by para. 1:"(1) Tax shall be chargeable on the full amount of the emoluments and the expression emoluments shall include all salaries, fees, wages, perquisites and profits whatsoever."
Certain members of the staff of a public authority were seconded to an electricity board to do a particular piece of work. They remained in the service of the authority and their salaries continued to be paid by the authority, who were partly reimbursed by the board. One of those so seconded was an engineer, who worked with the board for over two years until July 1964, when the work was virtually completed. He then left the employment of the authority and entered that of the board in a general capacity. At Christmas 1964 the chairman of the board sent him 1000, stating that the board were delighted with the success of the work for which he had been seconded and that, while appreciating that he was fully remunerated by the authority, they wished as a mark of their appreciation to make him a gift, and expressing the hope that he would accept it. Similar payments were made to some, but not all, of the seconded staff.
The engineer having been assessed to tax under Sched. E in a sum which included the 1000, the General Commissioners held that it was a gift and reduced the assessment accordingly.
Held that the Commissioners were entitled to hold that the 1000 was a gift, in respect (1) that it was paid after the work was completed, (2) that the board were not the engineer's employers when the work was being done, (3) that it was a single payment, (4) that it was described in the chairman's letter as a gift, and (5) (perLord Guthrie) that such payments were made only to some of the seconded staff.
At a meeting of the Commissioners for the General Purposes of the Income Tax for the Division of the Middle Ward of the County of Lanark held on 13th October 1966, Harry Morris appealed against an assessment under Schedule E in the sum of 6250 for the year ended 5th April 1965, made on him in respect of his emoluments for that year. The only question for determination was whether a sum of 1000 received by him at Christmas 1964 from the South of Scotland Electricity Board should or should not be included as part of his emoluments for that year. The Commissioners held that the 1000 was a gift and accordingly reduced the assessment to 5250. At the request of H.M. Inspector of Taxes they stated a case for the opinion of the Court of Session.
The case stated that the following facts were admitted:"(a) Mr Harry Morris is a Member of the Institute of Mechanical Engineers, a Member of the Institute of Electrical Engineers, and a Member of the Institute of Fuel. (b) Mr Harry Morris was employed by the United Kingdom Atomic Energy Authority (the Authority) from its inception in 1954. Under an agreement dated 11th December 1962 the Authority agreed to assist the South of Scotland Electricity Board (S.S.E.B.), at the request of S.S.E.B., by the loan of staff to take part in the supervision of the construction and completion on line of the Hunterston nuclear generating station. In particular it was agreed that Mr Morris would serve S.S.E.B. as Chief Engineer Nuclear Plants so long as he was available. The Authority reserved the right to call upon Mr Morris's services for their own purposes within limits laid down in head 1(d) of the agreement, (c) During the currency of the agreement, which was from 9th March 1962 until 31st December 1964, with power to extend, the Chief Engineer Nuclear Plants was to be retained in the Authority's service, but was seconded to and under the control of S.S.E.B. while engaged on S.S.E.B. work. Mr Morris was remunerated by the Authority, which in turn was reimbursed to the extent of four-fifths of his salary by S.S.E.B. Mr Morris's secondment to S.S.E.B. lasted from 9th March 1962 until 1st July 1964 (d) While under secondment Mr Morris was engaged exclusively on the Hunterston nuclear generating station. On 1st July 1964 he left the service of the Authority and was appointed Deputy Chief Engineer of S.S.E.B. (e) At Christmas 1964 Mr Morris received the sum of 1000 from S.S.E.B. A copy of a letter from the Chairman of S.S.E.B. to Mr Morris intimating the payment is annexed1 At the same time 15 other employees of the Authority who had been seconded to S.S.E.B. received amounts ranging from 150 to 750 each. A total of 34 persons were seconded from the Authority and 33 additional support staff were provided by the Authority (f) An assessment was made
on Mr Morris under Schedule E for 19641965 in the sum of 6250, which included the amount of 1000 in dispute "The case further stated:"The respondent gave evidence, which we accepted, as follows:(a) The situation at the Hunterston site at the time of his secondment was very serious owing to the inexperience of the contractors and the sudden death of the supervising engineer. The project was two years behind schedule, and there was even talk of abandoning it altogether. The respondent had been given the specific function of making the project successful and he had succeeded in this task. (b) As a condition of taking over responsibility for the successful completion of the Hunterston project the respondent had demanded that he be given the status of a Chief Officer of the South of Scotland Electricity Board and that he be given complete authority over all aspects of the project, subject only to the personal direction of the Chairman of the Board. These conditions were agreed to by the South of Scotland Electricity Board and throughout the period of his secondment he was in the position of a servant of the South of Scotland Electricity Board, (c) During the period of secondment the respondent's home was in Cheshire, and he also did a good deal of work on the project at the premises provided for that purpose in the United Kingdom Atomic Energy Authority's establishment at Risley. His duties consequently entailed a good deal of travelling with consequent personal inconvenience and disruption of his social and family fife. All the travelling and incidental expenses had been reimbursed and he had not suffered any financial loss as a result of the travelling, (d) By July 1964 the Hunterston project was virtually complete. During his secondment the respondent's former function with the United Kingdom Atomic Energy Authority had practically disappeared due to reorganisation, and he therefore accepted the post of Deputy Chief Engineer with the South of Scotland Electricity Board, and from then on had no more connection with Hunterston than with any other of the several generating stations under the control of the South of Scotland Electricity Board, (e) As regards the payment of 1000 at Christmas 1964, the Board's intention of making the payment had been mentioned to the respondent verbally by the Chairman a few days before, but it had not otherwise been discussed, and the wording of the Chairman's letter of Christmas 1964 had not been discussed by the respondent with the Chairman of the Board or with anyone else. The respondent had regarded the payment as generous and unexpected "
The contentions of the parties were stated as follows:
"It was contended on behalf of the respondent:(1) while engaged on the Hunterston project the respondent was employed by the United Kingdom Atomic Energy Authority and was fully remunerated by them for his duties; and (2) the payment of 1000 from the South of Scotland Electricity Board at Christmas 1964 was in the nature of a personal gift or testimonial to his personal and professional qualities and was not assessable to Income Tax.
"H.M. Inspector of Taxes contended:(1) that the payment of 1000 accrued to the respondent by virtue of his employment; (2) that in determining whether the payment was properly assessable as an emolument under Schedule E it was immaterial (a) whether the payment was made by the respondent's employer or by some other person; (b) that there was no binding obligation on the payer to make the payment; (3) that the payment was an emolument of the respondent's employment; (4) that the assessment under appeal should be confirmed."
The Commissioners stated their decision as follows:"We, the Commissioners who heard the appeal, held that the payment of 1000 received from the South of Scotland Electricity Board at Christmas 1964 was a gift or testimonial to the respondent and did not form part of his emoluments or remuneration, and accordingly we reduced the assessment to 5250."
The question of law for the opinion of the Court was "whether on the facts above stated we were right in deciding that the payment of 1000 received by the respondent at Christmas 1964 was a gift or testimonial, and as such not assessable to income tax."
The case was heard before the First Division on 30th November and 1st December 1967.
At advising on 7th December 1967,
LORD PRESIDENT (Clyde).The respondent in this case was assessed under Schedule E in respect, inter alia, of a sum of 1000 received by him at Christmas 1964, on the ground that it constituted a profit from his office or employment. The respondent appealed against this assessment in the sum of 1000 on the ground that it was a gift or testimonial and consequently was not assessable under Schedule E. The case came before the General...
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