McKnight (Inspector of Taxes) v Sheppard
| Jurisdiction | England & Wales |
| Court | Chancery Division |
| Judgment Date | 14 May 1996 |
| Date | 14 May 1996 |
Chancery Division
Before Mr Justice Lightman
Income tax - Schedule D - legal costs and fines not deductible
Legal costs and fines incurred by a stockbroker in connection with disciplinary proceedings brought against him alleging acts of dishonesty and misconduct were not deductible as revenue expenditure in calculating the taxable profits of his business.
Having deliberately departed from the rules of the Stock Exchange and from the lawful conduct of his business, the expenditure, although incurred wholly and exclusively for the purpose of his trade, did not have a sufficient connection with the profit-earning activity and thus came within the prohibition imposed by section 130(a) of the Income and Corporation Taxes Act 1970, see now section 74(1) of the Income and Corporation Taxes Act 1988.
Mr Justice Lightman so held in a reserved judgment in the Chancery Division allowing an appeal by the Crown from the determination of a special commissioner, Mr Theodore Wallace, that had held expenditure of £202,246 incurred by the taxpayer, Brian Stephen Sheppard, on legal fees was deductible under Case I of Schedule D.
The judge dismissed a cross-appeal by the taxpayer against the commissioner's determination that the expenditure on paying fines of £50,000 was not deductible.
The taxpayer was the sole proprietor of his stockbroking business. In 1986 the Stock Exchange Council's disciplinary committee found that he had committed various acts of dishonesty, gross misconduct and ordinary misconduct and imposed a six-month...
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McKnight (Inspector of Taxes) v Sheppard
...861. I do not think that the special commissioner's careful findings of fact lend support to this criticism. He recorded the taxpayer [1996] S.T.C. 627, 636 as saying in evidence that he “did not care about his personal reputation” (paragraph 71). While accepting the taxpayer as an honest w......
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Holmes & Ross v HM Revenue and Customs
... ... “error or mistake” claims under sections 33 and 33A of the Taxes Management Act 1970 (dealing respectively with errors or mistakes in ... Holmes were advised to supply the relevant information to their Inspector of Taxes for consideration. If the figures were agreed, the petition debts ... the light of the principles expounded by the House of Lords in McKnight v Sheppard [1999] 1 WLR 1333 I see no reason to doubt that legal and ... ...
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David Mcknight and Another v Brian Stephen Sheppard
...v. Bairstow [1956] AC 14. So viewed, the point at issue is a short one. 5 The decisions of the commissioner and the judge are reported at [1996] STC 627. The basic facts and the evidence as to purpose are rehearsed in the commissioner's decision between pp.629J and 634J and need not be repe......
