Inland Revenue v Shiels's Trustees
| Jurisdiction | Scotland |
| Judgment Date | 20 November 1914 |
| Docket Number | No. 18. |
| Date | 20 November 1914 |
| Court | Court of Session |
NO. 366.-COURT OF SESSION (SCOTLAND), FIRST DIVISION.-
Income Tax - Earned Income - Business carried on by Testamentary Trustees for benefit of Minor Beneficiaries. Income Tax Act, 1842, (5 & 6 Vic. c. 35), Section 41, and Finance Act, 1907, (7 Edw. VII. c. 13), Section 19.
A business is carried on by testamentary trustees on behalf of two minors who are beneficiaries under a will and the whole of the net profits of the business are annually paid over to or on behalf of the beneficiaries.
Held, that the business is not the property of the beneficiaries but of the trustees, that the profits of the business are not earned by the beneficiaries and are not immediately derived by them from the carrying on of their trade within the meaning of Section 19 of the Finance Act, 1907, and that the benefit of the relief in respect of earned income on the profits in question cannot be allowed.
At a meeting of the Commissioners for the General Purposes of the Income Tax Acts, and for executing the Acts relating to the Inhabited House Duties for the County of Edinburgh, held at Edinburgh on the 9th day of May, 1911;
Mr. James Young, Writer to the Signet, partner in the firm of Boyd, Jameson and Young, of 55, Constitution Street, Leith, appealed against an assessment for the year ending the 5th day of April, 1911, on the sum of £1,003 at the rate of 1s. 2d. in the £ in respect of profits of a business of wine merchants carried on at 134, Constitution Street, Leith, under the name or style of William Shiels and Company.
The assessment was made under the Acts 5 & 6 Vict. cap. 35, sec. 100, Sch. D, First Case; 16 & 17 Vict. cap. 34, sec. 2, Sch. D.; and 10 Edw. 7 and 1 Geo. 5, cap. 35, sec. 3.
The assessment on the sum of £1,003 was based on a return made and signed by Messrs. Boyd, Jameson and Young, agents for the trustees of the late Sidey Shiels.
The said return is printed in the appendix hereto, and forms part of this Case.(2)
The appeal has been taken not in respect of the amount on which the assessment was made, but solely on the ground that the assessment should be at the rate of 9d. per £ in terms of sec. 19 of the Finance Act, 1907 (7 Edw. 7, cap. 13).
I. The following facts were admitted or proved:-
(1.) The said business originally belonged to the late Mr. Sidey Shiels. He died on the 17th November, 1906, leaving a trust disposition and settlement dated the 5th day of July, 1900, by which he assigned and disponed to the trustees therein named the whole estate, heritable and moveable, real and personal, belonging to him at his decease. The said trust disposition and settlement is printed in the appendix hereto, and forms part of this Case.(1)
(2.) The testator directed the said trustees, inter alia, to give the liferent of the sums received by his trustees from any policies of assurance on his life to his sister, Frances Elizabeth Shiels, during her life, and to pay over the free annual proceeds of the residue of his estate (as well as the annual revenue from the sums to be received from the said life policies when the liferent in favour of the said Frances Elizabeth Shiels should come to an end) to his widow, Isabella Pyper Millons or Shiels, during her viduity. He thereafter directed his said trustees to divide the whole residue and remainder of his estate amongst such of his children as should be alive at the respective dates of division equally among them, share and share alike, if there should be more than one, and if there should be only one such child, then the whole to that one child.
(3) The trustees were empowered to apply the whole or any part of the income of the prospective share of a minor for or towards his or her maintenance or education, with liberty to pay the same to the guardians or guardian of such minor for the purposes aforesaid. His said estate included the business aforesaid, and his trustees were given power under the said trust disposition and settlement to carry it on for such time and on such conditions as they might think fit.
(4) Isabella Pyper Millons or Shiels died on the 16th day of January, 1908. Frances Elizabeth Shiels still survives.
(5.) The whole residue of the estate is being held by the said trustees for behoof of Ann Sidey Shiels and Isabel Marjorie Shiels, daughters of the late Sidey Shiels (who are both minors) as residuary beneficiaries under the...
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