Koenigsberger v Mellor (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 17 March 1995 |
| Date | 17 March 1995 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Leggatt, Simon Brown and Ward L JJ.
Leolin Price QC (instructed by Rosenbergs) for the taxpayer.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Erichsen v Last (Surveyor of Taxes) TAX(1881) 4 TC 422
Fry (Surveyor of Taxes) v Shiels' Trustees TAX(1914) 6 TC 583
IR Commrs v National Federation of Self-Employed and Small Businesses Ltd ELR[1982] AC 617
M'Dougall (Curator Bonis for M'Dougall) v Smith (Surveyor of Taxes)TAX(1918) 7 TC 134
Northend (HMIT) v White & Leonard & Corbin Greener & OrsTAX(1975) 50 TC 121
Werle & Co v Colquhoun (Surveyor of Taxes) TAX(1888) 2 TC 402
Income tax - Retirement annuity relief - Income received from Lloyd's syndicates by external name - Whether "income derived … from the carrying on or exercise" of trade - Income and Corporation Taxes Act 1988 section 623 subsec-or-para (2)Income and Corporation Taxes Act 1988, s. 623(2)(c) (replacing Income and Corporation Taxes Act 1970 section 226 subsec-or-para (9)s. 226(9)(c) of the 1970 Act).
This was an appeal by the taxpayer against a decision of Lindsay J ([1993] BTC 229) that an external name at Lloyd's was not entitled to retirement annuity relief on premiums paid out of Lloyd's income.
As an external member of Lloyd's ("a name") the taxpayer was obliged to deal through an agent on terms laid down by Lloyd's. The agreement between the taxpayer and his agent included a term that the agent should have the sole control and management of the underwriting business and the name should not in any way interfere with the exercise of such control or management, while the managing agent of each underwriting syndicate made all decisions as to what risks should be accepted.
The taxpayer was accustomed to spend three or four hours per week on Lloyd's business in order to decide how to spread his underwriting involvement between types of insurance and which syndicates to leave and which to join and discussed his affairs regularly with his agent.
The taxpayer paid a premium of £1,000, referable to the year 1987-88, under a retirement annuity contract out of income received from Lloyd's syndicates.
The question for decision was whether the taxpayer was entitled to retirement annuity relief under the Income and Corporation Taxes Act 1988 section 619 subsec-or-para (1)Income and Corporation Taxes Act 1988, s.619(1) in respect of the premium paid out of his Lloyd's income which was taxable under Sch. D.
The inspector refused the relief on the ground that, although the premium of £1,000 qualified in other respects, the Lloyd's income did not constitute "relevant earnings" within the definition of that term in the Income and Corporation Taxes Act 1988 section 632 subsec-or-para (2)Income and Corporation Taxes Act 1988, s.623(2)(c), that is income "immediately derived by him from the … exercise by him of his trade, profession or vocation … as an individual".
The judge held that the income was not immediately derived by him from carrying on a trade and that the taxpayer's personal exertions were only preparatory to carrying on the trade of underwriting, being directed only to which syndicates to join.
Held, dismissing the taxpayer's appeal:
While the income was derived by the taxpayer from the business of underwriting, and was "immediately" derived from that source, nevertheless, the trade of underwriting was not carried on by him as an individual but by his agent and the managing agents of the syndicates which he joined. Through his agent he subscribed to risks selected on behalf of each syndicate by its managing agent. It followed that the taxpayer's income from Lloyd's did not qualify as relevant earnings for the purpose of retirement annuity relief.
Leggatt LJ: The respondent, one of Her Majesty's inspectors of taxes, refused the claim by the appellant, Carl Koenigsberger ("the taxpayer"), for retirement annuity relief under the provisions ofIncome and Corporation Taxes Act 1988 section 619s. 619 of the Income and Corporation Taxes Act 1988 for the year of assessment 1987-88. On 5 November 1991 Judge Medd QC sitting as a special commissioner dismissed the taxpayer's appeal. On 10 May 1993 Lindsay J ([1993] BTC 229) ordered that the determination of the special commissioner, in respect of which a case had been stated, be affirmed. Against that order the taxpayer now appeals.
By his decision annexed to the case stated the special commissioner recorded that the taxpayer is a barrister who has practised in London since 1958. He claimed retirement annuity relief against the income received by him in the year of assessment 1987-88 from syndicates at Lloyd's of which he was a member or "name". He also elected that his personal pension contribution should be treated as final in the year of assessment 1987-88 in accordance with Income and Corporation Taxes Act 1988 section 641s. 641 of the Income and Corporation Taxes Act 1988, and therefore that payment should be treated as the payment of a qualifying premium for the purposes ofIncome and Corporation Taxes Act 1988 part XIVCh. III, Pt. XIV of that Act by virtue of Income and Corporation Taxes Act 1988 section 655 subsec-or-para (2)s. 655(2).
Relief may be claimed under Income and Corporation Taxes Act 1988 section 619 subsec-or-para (1)s. 619(1) of the Income and Corporation Taxes Act 1988 which (so far as material) provides:
Where in any year of assessment an individual is (or would but for an insufficiency of profits or gains be) chargeable to income tax in respect of relevant earnings from any trade, profession, vocation, office or employment carried on or held by him, and pays a qualifying premium, then-
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(a) relief from income tax shall be given under this section in respect of that qualifying premium, but only on a claim made for the purpose, and where relief is to be so given, the amount of that premium shall, subject to the provisions of this section, be deducted from or set off against his relevant earnings for the year of assessment in which the premium is paid …
The taxpayer paid a qualifying premium of £1,000 which is referable to the year of assessment...
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