Lord Glanely v Wightman (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | Viscount Buckmaster,Lord Tomlin,Lord Russell of Killowen,Lord Wright |
| Judgment Date | 14 March 1933 |
| Judgment citation (vLex) | [1933] UKHL J0314-1 |
| Date | 14 March 1933 |
| Court | House of Lords |
[1933] UKHL J0314-1
House of Lords
Viscount Buckmaster.
Lord Tomlin
Lord Russell of Killowen.
Lord Wright.
After hearing Counsel, as well on Tuesday the 21st, as on Thursday the 23d and Friday the 24th, days of February last, upon the Petition and Appeal of Lord Glanely, of Exiling House, Newmarket, Suffolk, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 19th of July 1932, might be reviewed before His Majesty the King in His 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 His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of A. F. Wightman, one of His 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 His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 19th day of July 1932, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Cause be, and the same is hereby, Remitted back to the Commissioners for the Special Purposes of the Income Tax Acts with a Direction to discharge the Assessments: And it is further Ordered, That the sums paid in respect of Income Tax relating to the two Assessments be repaid by the Commissioners of Inland Revenue, together with interest at the rate of 4 per centum per annum from the date of payment: And it is also further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellant, the Costs incurred by him in the Courts below, and also the Costs incurred by him in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments.
My Lords,
The question arising on this Appeal is whether the Appellant is liable to income tax in respect of payments made to him for the service by his stallions of mares sent to his stud by outside owners. He was assessed in respect of these figures for the year ended 5th April, 1922, and for the year ended 5th April, 1927, these assessments were, upon Appeal, confirmed by the special Commissioners, their decision being supported by Rowlatt, J., and by a majority of the Court of Appeal, Lord Justice Romer dissenting.
The facts of the case are these. The Appellant in 1919 acquired a house known as Exning House, near Newmarket, and the stud farm attached to it, and subsequently, an adjoining stud farm called North End. Upon the land so acquired he has established a stud farm, and in substance the whole of the area, amounting to 888 acres, is used for and in connection with the stud. Upon this farm he breeds thoroughbred stock, and uses his stallions both for the purpose of serving his own mares and the mares of other people brought into his farm for the purpose. No mares are served outside the farm. He advertises his stallions, with the fees charged for the service of each, and, roughly speaking, twice as many visiting mares are served as his own. It is for the fees in respect of the services for these outside mares that the assessment has been made. The mares themselves remain on the farm for about four months, and the Appellant receives payment for their keep during the time.
The Appellant's claim is that he is only entitled to be taxed under Schedule B in respect of his occupation of the land, and that the profits derived from the use of the stallions are not profits of a trade, adventure or concern separate from and outside the purpose of such occupation.
It is as well to consider this contention in the first instance, apart entirely from questions of authority. It is not disputed by the Crown that the occupation of the land for the purposes of the stud farm is an occupation within the meaning of Schedule B, the terms of which contain no qualification of the occupation to which it refers. It is, of course, obvious that in some sense land is occupied for every purpose of trade, but I think it is plain that the occupation referred to is an occupation which, in itself and by its enjoyment, is the source of the income and profits to be taxed. Nor is such occupation limited to the purpose of husbandry, as is shown by the later part of the Rule.
Now a stud farm is plainly an occupation of the land, and the breeding and sale of foals arises from such occupation, and for such purpose the use of the stallion is as indispensable as the use of the mare. The payment, therefore, for the services of the stallion for use upon the land is as much a breeding operation as the production of the foal by the mare, and I find it difficult to see why, when other people's mares are sent on to the farm, and kept there, the payment for the services of the stallion is not a normal part of the purposes for which the land is occupied and inseparable therefrom.
This is the argument which has found favour with Lord Justice Romer, and I think it is sound.
It is then said that none the less the matter is covered by authority. Of the earlier case, known as Lord Derby's case in 1915, 3 K.B., p. 374, although the point might have been raised, in fact it was not, and that case and the subsequent one in 10 Tax Cases, p. 357, affords no help. Nor, in my opinion, does the case of Carlisle and Silloth Golf Club v. Smith in 1913, 3 K.B., p. 75. In that case, all the fees paid by strangers for the use of the golf club were held liable to tax upon the distinct ground that these fees related to a trade or enterprise entirely separable from the use of the land by the members of the golf club. The judgments of the Court were clearly confined to this issue, and offer no assistance here.
The case most nearly approaching the present is the case of Malcolm v. Lockhart, 1919, Appeal Cases, at p. 463, and it is a case that requires careful and critical examination since, if it establishes the principle for which the Respondents contend, the authority binds this House. In that case the man occupied land which was certainly treated as an ordinary farm, although, in addition to 400 sheep, the occupier bred a stud of Clydesdale horses. A stallion which he used upon his farm was let out and taken round the country, where it served the mares of the adjoining farms and other people who required its services. Assessment was made in respect of the profits earned by these outside services, and it is plain from the findings of fact in that case that it was only the monies so received that it was sought to tax. The Court of Session treated the case upon the hypothesis that the land was occupied as an ordinary farm, and that the use of the stallion outside it was outside the purpose of this occupation.
The Lord President said:
"If the farm lease terminated tomorrow, then the farmer would, if, as I presume, it was for his profit, certainly continue to carry on this business."
And Lord Johnstone stated that the employment of a stallion for stud purposes for hire outside of his own farm is no part of the business of a farmer. He says:
"A stallion kept for this purpose has no inherent relation to a farm or to the adventure of a farmer."
It was in these circumstances that the matter came before your Lordships' House, where the real question argued was whether there was any reason to displace the finding of fact of the Commissioners that the employment of a stallion for stud purposes for hire outside his own farm is no part of the business of a farmer.
It would not be possible for this House to question that decision, but I see no reason why it should be open to question notwithstanding the fact that the farmer there did breed on his own land. The whole case was based upon the occupation of the land being that for ordinary farm purposes, and there was no reason to displace the finding of the Courts that the sale of the services of the stallion when taken round the countryside formed no part of that business.
The case of McLaughlin v. Bailey, 1920, 2 Irish Reports, p. 310, does I think, cover this case; but it was based upon the view of Malcolm v. Lockhart, which, I think, was mistaken. The phrase there used which contrasts the use of a horse in connection with a farm with its use outside, ought to be construed in its widest sense and must be interpreted in the light of the finding of facts by the Commissioners that there was a farm business for which the land was occupied, and that the use of this stallion was for a separable and distinct purpose.
I do not think, therefore, that the case of Malcolm v. Lockhart covers and disposes of this case. Each case must depend upon its own special circumstances. The occupation of the land in this case being for the purpose of a stud farm, the use of the stallion upon the farm cannot be taxed unless it can be said that it constitutes something distinct and separable from the purpose of the occupation, and I find myself unable to accept this view.
I think, therefore, that this Appeal must be allowed, and the assessment discharged.
My Lords,
The conclusion reached by Mr. Justice Rowlatt and the majority of the Court of Appeal in this case is one which with respect I cannot accept.
It is not disputed that the occupation of land for the purposes of a thoroughbred stud farm is an occupation, the profits of which are covered by an assessment under Schedule B and that in respect of such occupation no claim founded upon Schedule D could arise.
Further, it is not suggested that the stud farmer would have to account under Schedule D for the proceeds of sale of a foal from any of his mares whether covered...
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