Mitchell and Edon v Ross
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE PEARCE,LORD JUSTICE HARMAN,THE MASTER of THE ROLLS |
| Judgment Date | 24 March 1960 |
| Judgment citation (vLex) | [1960] EWCA Civ J0324-2 |
| Date | 24 March 1960 |
| Court | Court of Appeal |
[1960] EWCA Civ J0324-2
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls,
Lord Justice Pearce and
Lord Justice Harman
(The appeals of the Respondents)
Mr F. HEYWORTH TALBOT, Q.C. and Mr J.L. CREESE (instructed by Messrs Hempsons, 33, Henrietta Street, Strand, W.C.2.) appeared as Counsel for the Respondents (Appellants).
Mr R.O. WILBERFORCE, Q.C. and Mr ALAN ORR (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, London, W C 2.) appeared as Counsel for the Appellants (Respondents).
: The five appeals in which we are now giving judgment have raised the same questions, in substance two in number. For the purposes of the hearing in this Court, as for the purposes of the hearing before Mr Justice Upjohn, as he then was, the facts in the case of Dr Ross have been taken as typical of all five cases, and I shall therefore, as did the learned Judge, treat the facts relating to Dr Ross, appearing from the Case Stated by the Special Commissioners upon Dr Ross's appeal against the assessments made against him, as typical of the facts relevant to all the appeals, and therefore as constituting the necessary basis for this Judgment upon all the appeals.
As the learned Judge justly observed, the material circumstances are set out most fully in the Case Stated, which contains also an analysis of the relevant; provisions of the National Health Service Act, 1946, and of various statutory instruments made there under. Like him, therefore, I shall confine myself to such brief statement of facts as will suffice to make clear the nature of the questions for our decision and the reasons for my conclusions upon them.
Dr Ross is and has at all material times been a qualified and registered medical practitioner. He is and has at all material times been, in common with the other Appellants, of the category of medical practitioners known as "specialists". The word is so commonly understood that it requires no further exposition. It is used in its commonly understood sense (and so as to be applicable to Dr Ross and the other Appellants) in the Act of 1946 itself, particularly in Sections 3 and 14, to which I shall later make again some reference. Dr Ross's specialist activity is that of a consultant radiologist. In that capacity he attends private patients, and he also holds a part-time appointment by contract with the Birmingham Regional Hospital Board at certain hospitals in the area of the Board. The professional activities of the other Appellants are in all material respects wholly similar. The only difference between them is that whereas in the case of Dr Ross and three of the other Appellants the foes received in the relevant years of assessment from private patients were appreciably less than the emoluments from the hospital appointments, in the case of the remaining Appellant, Dr Hirtenstein, the fees from private patients exceeded the hospital emoluments. But no point was made before us arising out of the distinction.
I can now state the first of the questions debated before us. It is this: Should Dr Ross be assessed for income tax in respect of the profits or gains or emoluments arising to him from his practice as a consultant radiologist, alike from his private patients as from the hospital appointment, entirely under the relevant Rules of Schedule D? Dr Ross's contention is that he should. Or, as the Crown contends, should he be assessed under Schedule D in respect of the profits or gains arising from his private patients and under Schedule E in respect of his emoluments under his hospital appointment? I have so far deliberately, and for reasons which will later sufficiently appear, avoided the use of the word "profession"; but it has not been in dispute that Dr Ross's profits or gains from his services to private patients and his emoluments from his hospital appointment alike arose from his practice, his one "job in life", as a consultant radiologist.
I should assume that nine people out of every ten —indeed, that everyone not versed or experienced in the intricacies and anomalies that the heritage of a century and a half of income tax legislation has bequeathed — would, upon hearing the questions that I have posed; enquire, That can it matter? Why "should it matter?" And emphasis is given to the enquiry by the Commissioners' finding that Dr Ross's part-time hospital appointment, no less than his private practice, was a part, and indeed a "necessary" part, of his profession as a consultant radiologist. The actual language of the finding, supplemented after the case had been sent back to them by Mr Justice Roxburgh for the purpose, was as follows: "We also find that at all material times Dr Ross exercised the profession of consulting radiologist, his part-time hospital appointments being a necessary part of the exercise of that profession by him and merely incidental thereto, notwithstanding that a great deal of his time was thereby taken up. We do not seek", they added, "to describe the profession of consulting radiologist in general". There was some discussion before us of the exact significance of the language I have quoted, which Mr Justice Upjohn described as not entirely happy. But this much was quite clear and not in dispute: that for one in Dr Ross's position who was earning his living as a consultant radiologist, the undertaking of part-time hospital appointments was part of his "job" (and again I deliberately do not use the word "profession") - and a part of it which, as a matter of practical necessity for professorial success, he had to do. And the same is true of the other four Appellants, save for the substitution for "consultant radiologist" of their respective specialist activities.
Why, then, should it matter whether Dr Ross is assessed wholly under Schedule D or partly under that Schedule and partly under Schedule E? The answer is that, notwithstanding the unity of Dr Ross's calling as a consultant radiologist, the allowances and deductions which he may make under the two Schedules differ. The rules for chargeability under Schedule D are now to be found in part V of the Income Tax Act, 1952, beginning with Section 122. By Section 137 (a), the permissible deductions are, in effect, defined, so far as relevant, as sums wholly and exclusively expended for the purposes of the taxpayer's profession or vocation. Liability under Schedule E is expounded in Part VI of the Act, beginning at Section 156. I shall not here recite the language of the two charging sections, which in material respects show a certain lack of conformity. But the disconformity is further exhibited by the. circumstance that for the appropriate allowances under Schedule E it is necessary to turn to the 9th Schedule to the Act, paragraph 7 of which reads as follows: "If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of traveling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed".
To the reader in the present age (which is sometimes described as that of the internal combustion engine), the reference to the horse will be somewhat startling. Its presence is evidence of the long ancestry of the paragraph, re-enacted in succeeding consolidating statutes; for it reflects the fact, interesting, if hardly relevant to-day, that the means and speed of conveyance of an inhabitant of this island from one place to another depended in Napoleon's days, as it had depended in the days of Julius Caesar, upon the performance of the horse. More important, however, for present purposes is that the standard of permissible deductions under Schedule E is that of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the taxpayer's office or employment. Thus the standard is in two respects stricter than that appropriate to the taxpayer assessed under Schedule D; for (1) not only must the expenses be wholly and exclusively but they must also be necessarily incurred, and (2) they must be incurred not merely for the purposes of the taxpayer's office or employment but, according to the language, actually in the performance of the duties of it.
When Schedule E was first devised it was limited in its application to the holders of certain public offices tabulated in paragraph 5 of the Schedule. It may well be that the stricter standard of allowances was appropriate and sensible in the case of the holders of such offices, whether equestrian or otherwise, starting with the holders of offices belonging to either House of Parliament; and it may also be that 150 years ago the class of Schedule D taxpayers was far smaller than it is to-day. Put in 1922 there was transferred from the embrace of Schedule D to that of Schedule E a large class of taxpayers covered by the language of what is now the proviso to Section 122 (1) of the 1952 Act and reflected in Section 156, paragraph 2. It is of course altogether beyond the scope of this Judgment...
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