Laidler v Perry ; Morgan v Perry
| Jurisdiction | England & Wales |
| Judge | Lord Reid,Lord Morris of Borth-y-Gest,Lord Hodson,Lord Donovan,Lord Pearson |
| Judgment Date | 08 April 1965 |
| Judgment citation (vLex) | [1965] UKHL J0408-2 |
| Date | 08 April 1965 |
| Court | House of Lords |
[1965] UKHL J0408-2
House of Lords
Lord Reid
Lord Morris of Borth-y-Gest
Lord Hodson
Lord Donovan
Lord Pearson
Upon Report from the Appellate Committee, to whom was referred the Cause Laidler against Perry (Inspector of Taxes), that the Committee had heard Counsel, as well on Tuesday the 9th as on Wednesday the 10th, days of March last, upon the Petition and Appeal of Douglas Stewart Laidler of 84, Vicarage Lane, King's Langley, Herts, praying. That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 4th of June 1964, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of William Arthur Perry (one of Her Majesty's Inspectors of Taxes), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 4th day of June 1964, Complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House; And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The Appellant appeals against additional assessments to Income Tax of £10 for each of the years 1955-56 to 1960-61. Each assessement of £10 is in respect of a voucher given to the Appellant by his employers at Christmas. He is research manager of Associated Lead Manufacturers, Ltd., a company formed by amalgamation of a number of old family businesses. It had been the custom of these businesses to make Christmas gifts in kind, such as turkeys, to members of their staffs and to provide entertainment for their manual workers and after amalgamation this custom was continued. When it became impossible during the last war to make gifts in kind. National Savings Certificates were given instead. After the war it was decided to give a voucher for £10 to each member of the staff, including ex-members drawing pensions, to be spent in shops of their choice. In 1960 about 2,300 vouchers for £10 were so given. Each year the gift is enclosed with a letter from the Chairman sending Christmas greetings and expressing the thanks of the Board for past services and their confidence that good relations with the staff would continue. Letters received in reply shew that this was much appreciated.
The Appellant and other members of the staff are taxable under Schedule E of the Income Tax Act 1952 as amended by the Finance Act 1956, of which the leading provision in section 156 is "Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom …", and in the Second Schedule to the Finance Act 1956 it is provided that "the expression 'emoluments' shall "include all salaries, fees, wages, perquisites and profits whatsoever." It is not disputed that this definition is wide enough to include these vouchers, and it is not now disputed that by reason of the very wide range of choice in spending them, each is worth its face value of £10. But section 156 applies only to "emoluments therefrom" i.e., from the office or employment of the recipient and it is well settled that not every sum or other profit received by an employee from his employer in the course of his employment is to be regarded as arising from the employment. So the question in this case is whether these profits or emoluments of £10 did or did not arise from the Appellant's employment.
There is a wealth of authority on this matter and various glosses on or paraphrases of the words in the Act appear in judicial opinions including speeches in this House. No doubt they were helpful in the circumstances of the cases in which they were used, but in the end we must always return to the words in the Statute and answer the question—did this profit arise from the employment? The answer will be no if it arose from something else.
The Appellant largely based his case on opinions expressed in this House in Hochstrasser v. Mayes [1960] A.C. 376: 38 T.C. 673. The Respondent was employed by Imperial Chemical Industries. In accordance with a scheme set up by the Company to facilitate movement of certain classes of employees from one place to another he entered into an agreement with them one term of which was that, if he bought a house and had to resell it later at a loss, the Company would indemnify him. Then he bought a house for £1,850 and later sold it for £1,500. The Company paid the difference, £350, and the Respondent was assessed on this sum as an emolument from his employment. The Crown's argument was that money received by an employee as such must be a profit or emolument except only insofar as he has given consideration in money or moneys worth over and above his services. But the sum was held not to be taxable. Lord Simonds quoted with approval a passage from the judgment of Upjohn J. in which he said
"Indeed, in my judgment, the authorities shew that to be a profit arising from the employment the payment must be made in reference to the services the employee renders by virtue of his office, and it must be something in the nature of a reward for services past, present or future."
"If in such cases as these the issue turns, as I think it does, upon whether the fact of employment is the causa causans, or only the sine qua non, of benefit, which perhaps is only to give the natural meaning to the word 'therefrom' in the statute, it must often be difficult to draw the line and say on which side of it a particular case falls."
With regard to the words of the statute Lord Radcliffe said:
"For my part, I think that their meaning is adequately conveyed by saying that, while it is not sufficient to render a payment assessable that an employee would not have received it unless he had been an employee, it is assessable if it has been paid to him in return for acting as or being an employee."
and later he said:
"In my opinion, such a payment is no more taxable as a profit from his employment than would be a payment out of a provident or distress fund set up by an employer for the benefit of employees whose personal circumstances might justify assistance."
In my judgment what was said in that case cannot apply to the circumstances of the present case. The Commissioners have found as a fact the reason why these vouchers were given.
"The directors of the group followed this policy because the distribution of personal presents at Christmas time was one of several measures which help to maintain a feeling of happiness among the staff and to foster a spirit of personal relationship between the management and staff: the directors believing that a contented staff was a good thing in itself and likely to be of advantage to the group."
The Appellant argues that this shews that these gifts were not rewards for services; it would have been derisory if not insulting to give £10 to a man in his high position as a reward for his services. I would accept that, but I think that, although the word "reward" has been used in many of the cases, it is not apt to include all the cases which can fall within the statutory words. To give only one instance, it is clear that a sum given to an employee in the hope or expectation that the gift will produce good service by him in future is taxable. But one can hardly be said to reward a man for something which he has not yet done and may never do.
The Appellant's argument is that these gifts were made not as rewards but to promote loyalty...
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