Mapp (HM Inspector of Taxes) v Oram
| Jurisdiction | England & Wales |
| Judgment Date | 23 July 1969 |
| Date | 23 July 1969 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Income Tax - Child allowance - Income of child - Foreign employment - No remittance to United Kingdom - Whether child "entitled…to an income" - Income Tax Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), s. 212(4).
During the year 1965-66 the Respondent's son was an undergraduate reading modern languages at the University of St. Andrews. On his tutor's advice he had taken a teaching post in France from October 1964 to June 1965, after which he resumed his degree course at the University. His gross emoluments in 1965-66 from his French appointment were £150, which was wholly spent in France on board, travelling, etc.
The Respondent claimed child allowance for 1965-66 in the full amount of £165. On appeal, he contended (inter alia) that "entitled in his own right to an income" in s. 212(4), Income Tax Act 1952, meant only income chargeable to income tax. For the Crown it was contended that that expression must be read in its commonsense or everyday meaning. The General Commissioners held that the Respondent was entitled to the allowance claimed.
In the High Court the Crown abandoned its contention before the Commissioners but contended that "an income" meant income as computed for the purposes of Schedule E after deducting expenses allowable under para. 7 of Sch. 9, Income Tax Act 1952. In the Court of Appeal and the House of Lords the Crown contended that, although para. 7 of Sch. 9 had no direct application, it should be applied by analogy.
Held, that the Commissioners' decision was correct.
Stated under the Income Tax Act 1952, s. 64, by the Commissioners for the General Purposes of the Income Tax for the Division of West Goscote in the County of Leicester for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners holden on 19th May 1966 for the purpose of hearing appeals Leonard Murray Oram (hereinafter called "the
Respondent") appealed against the refusal of the Inspector of Taxes to allow a claim to child allowance for the year ended 5th April 1966 in the full amount of £165. The sole question for our determination was whether the allowance should be allowed in full, or whether it should, by virtue of s. 212(4), Income Tax Act 1952, be restricted.2. The following facts were proved or admitted:
(i) The Respondent has a son (hereinafter called "the son") who, being over the age of 16 years, was at the commencement of and during the year of assessment 1965-66 an undergraduate at the University of St. Andrews, where he was reading modern languages.
(ii) The son had been advised and encouraged by his tutor to reside in France and to work there as an English assistant (or temporary teacher) at a lycé in order to perfect his knowledge of French.
(iii) The son obtained such an appointment, which he held from October 1964 until June 1965 (the French academic year), and in October 1965 he returned to St. Andrews University to resume his degree course. During the year of assessment 1965-66 the son carried out the duties of such appointment for a period of two and one-half months, receiving therefor in France a gross emolument equivalent to £150.
(iv) During the son's period of residence in France board was not provided, and he was required to provide temporary board and travelling and necessary incidental expenses at his own sole charge.
(v) Hence the son spent in France all that he had earned and none of the emolument of £150 was remitted to or enjoyed in the United Kingdom.
3. We were therefore called upon to decide whether in the year of assessment 1965-66 the son was entitled in his own right to an income exceeding £115 within the meaning of s. 212(4), Income Tax Act 1952.
4. It was contended for the Respondent that:
(a) "income in his own right" within the terms of s. 212(4) of the Income Tax Act 1952 meant income computed in accordance with the Income Tax Acts: that is to say, income for income tax purposes (citingPrince v. Phillips (1961) 39 T.C. 477);
(b) the French emolument was not chargeable to income tax under Case I, II or III of Schedule E; though the son was resident in the United Kingdom his duties had been carried out entirely abroad and no part of the emolument had been remitted to or received in the United Kingdom;
(c) the emolument was not, therefore, chargeable to income tax at all;
(d) in the alternative, if (which the Respondent did not admit) "income in his own right" did not mean "chargeable income" but meant income in some other and more popular sense, it still fell to be reduced by the amount of such expenditure as was essential to enable the emolument to be earned, which expenditure on the facts of the present case manifestly exceeded £35.
5. It was contended by the Inspector of Taxes as follows:
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(a) "income" was nowhere defined in the Income Tax Acts, and the words "entitled in his own right to an income" in s. 212(4) referred to income actually received by the son which was his own; the expression was not confined to income for income tax purposes, but must be read in its commonsense or everyday meaning: he cited Lady Miller v.Commissioners of Inland Revenue(1) 15 T.C. 25, at page 49;
(i) the expression "who is entitled in his own right to an income exceeding £115 a year" in s. 212(4), Income Tax Act 1952, was to be contrasted with the expression in s. 216(1) of the Act (which provides for dependent relative relief) "whose total income does not exceed £285 a year";
(ii) the expression "total income" is defined in s. 524 of the Act;
(iii) the provisions for child allowance and dependent relative relief had first been enacted in ss. 21 and 22, Finance Act 1920;
(iv) if, for the purposes of s. 212(4), it had been intended to limit the relevant income of the child to income for the purposes of the Income Tax Acts, then the Legislature would have used the expression "total income", as it had done in s. 216;
(b) he cited Miles v. Morrow (1940) 23 T.C. 465, at page 469; Johnstone v. Chamberlain (1933) 17 T.C. 706, at page 715; and Scottish Shire Line Ltd. v. Lethem 6 T.C. 91(1), at page 99, in support of the contention that the intention of s. 212 as amended was to give child allowance to the claimant subject to a straightforward means test against the child in question; if "income" meant "chargeable income" there would have been no need in s. 212 specifically to exclude income from scholarships and bursaries, since such income was already exempt from charge by virtue of s. 458, Income Tax Act 1952;
(c) though the gross emolument of £150 was not assessable to income tax under Schedule E or at all, that gross sum had been received by the son as income to which he was "entitled in his own right", so that the Respondent's child allowance should be reduced from £165 by deducting therefrom £35 (being the excess of the gross emolument of £150 over the statutory limit of £115);
(d) the Commissioners should determine that the Respondent was entitled to child allowance in respect of the son for the year of assessment 1965-66 in the sum of £130 (being £165 less £35).
6. We, the Commissioners, having found that the son's emolument was not assessable to income tax under Schedule E or at all, were of opinion that:
(a) Prince v. Phillips 39 T.C. 477 seemed to support the contention that "income" in s. 212 was not a loose expression but meant income in the same general sense as it meant elsewhere in the Act, that is to say, income for income tax purposes. It appeared to us that the Crown had so submitted in that case and that Buckley J. had accepted the submission.
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(b) So far as it was permissible for us to examine (as we were invited to do by the Inspector of Taxes) what might have been the intention of the Legislature, whether the relevant expression should have the more precise meaning of "income within the meaning of the Income Tax Acts" (that is to say "income chargeable to United Kingdom income tax") on the one hand or the looser meaning of "income actually received by the son which was his own" on the other:
(i) if income were intended to mean "chargeable income" it was then easy by the application of the Schedule E rules and of such cases asRicketts v. Colquhoun(2) 10 T.C. 118 and many related Schedule E cases to determine what deductions (if any) might be made from a child's gross income in order to ascertain his chargeable income constituting his "income in his own right";
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(ii) per contra, an intention by the Legislature to substitute the looser definition seemed to imply a further intention that there should be an absence of definition whether any and what deductions might ever be made from a child's gross emolument in order to arrive at his "income in his own right";
(iii) thus in the present case the son had incurred travelling expenses and the excess cost of his living at the place of his employment (which is notoriously high in France), both incurred essentially and manifestly totalling more than £35. An adoption of the looser definition appeared to involve the acceptance of the proposition either that the Legislature intended that for the purposes of child allowance a child's income must always be taken at its gross figure without deduction or that, whilst some deduction might be possible, it should be unspecified. We did not see how we could very properly look for assistance to the Schedule E rules and cases in determining what might be proper deductions from an emolument which was not chargeable to Income Tax under Schedule E or at all.
For these reasons we considered it unlikely that the Legislature intended the looser definition to prevail.
7. We accordingly allowed the appeal and determined that the Respondent was entitled to a child allowance for the son in the sum of £165.
8. Immediately after our determination the Inspector of Taxes declared to us his dissatisfaction therewith as being erroneous in...
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