Murphy v Ingram (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 12 March 1974 |
| Date | 12 March 1974 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Income tax - Child allowance - Child's income in his own right - Married daughter living with her husband - Ceasing to receive full-time instruction at university and taking paid employment - Whether to be treated as "child" of her parents - Whether her earnings to be taken into account - Income Tax Act 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), ss. 212 and 354(1); Finance Act 1963 (c. 25), s. 13.
The Appellant's daughter, born in May 1946, was receiving full-time instruction at a university until 19th June 1969, married on 19th July 1969 and began employment as a teacher in October 1969. Her total income for the part of the year of assessment 1969-70 up to the date of her marriage was £10 and for the rest of the year was not less than £270. The Inspector of Taxes refused a claim by the Appellant for child allowance for 1969-70 in respect of her on the ground that she was entitled in her own right to an income exceeding £115 a year by the full amount on which the allowance would have been due if she had had no income.
On appeal, the Appellant contended, inter alia, (a) that on her marriage his daughter ceased to be his "child" for the purposes of child allowance; alternatively, (b) that her income from the date of her marriage fell to be treated as her husband's income and not as hers. For the Crown it was contended, inter alia, that the rule deeming the income of a married woman to be the income of her husband was concerned only with the machinery of taxation and was not relevant for the purposes of child allowance. The General Commissioners dismissed the appeal.
In the Court of Appeal the Appellant put forward the further alternative contentions (c) that his daughter ceased to be his "child" for the purposes of child allowance when she ceased to be in full-time education at the university and (d) that the expression "entitled in his own right to an income" referred only to income under a trust, etc., and did not extend to his daughter's earnings.
Held, (1) that the Appellant's daughter did not cease to be his "child" for the purposes of child allowance either on marriage or on ceasing full-time education; (2) that the earnings of a child were income to which the child was "entitled in his own right" for those purposes; (3) that the rule that the income of a married woman living with her husband should be deemed for income tax purposes to be his income and not to be her income was relevant in the context of Part XIV of the Income Tax Act 1952 only in relation to the taxation of a husband and wife living together, and did not affect the operation of the child allowance provisions on the tax liability of a third party.
Miles v. Morrow (1940) 23 T.C. 465 and Williams v. Doulton (1948) 28 T.C. 522 approved; dicta of Lords Hodson and Pearson in Mapp v. Oram 45 T.C. 651, at pages 677 and 682; [1970] A.C. 362, at pages 371 and 377, followed on point (2); dicta of Lord Upjohn 45 T.C., at page 681; [1970] A.C., at page 376, not followed.
Stated under the Taxes Management Act 1970, s. 56, by the Commissioners for the General Purposes of the Income Tax for the Division of Wembley for the opinion of the High Court of Justice.
1. At a meeting of the said Commissioners held on 23rd March 1972 at Harrow Magistrates' Court, Rosslyn Crescent, Harrow, in the London Borough of Harrow, G. H. Murphy, of 29 Sunny Gardens Road, London N.W. 4 (hereinafter called "the Appellant"), appealed under s. 42(3) of the Taxes Management Act 1970 against a decision of an Inspector of Taxes under the said section which disallowed the Appellant's claim to child allowance for the year ended 5th April 1970 in respect of his child Eileen Murphy born on 9th May 1946 (hereinafter called "the daughter").
2. The question for our decision was whether the Appellant was entitled to the said child allowance within the provisions of s. 212(4) of the Income Tax Act 1952, as amended by s. 13 of the Finance Act 1963.
3. The Appellant G. H. Murphy was present and gave evidence (which we accepted) before us.
4. The following facts were proved or admitted:
(a) The Appellant has a daughter Eileen born on 9th May 1946, now aged 26 years.
(b) The daughter was receiving full-time instruction at the University of York until 19th June 1969.
(c) She married on 19th July 1969, and began employment as a teacher in October 1969.
(d) The daughter's total income between 6th April 1969 and the date of her marriage was £10.
(e) The daughter's total income between the date of her marriage and 5th April 1970 was not less than £270.
(f) Her total income for the year ended 5th April 1970 was not less than £280.
5. The Appellant contended:
(a) That by a notice of coding dated 27th October 1969 the Inspector of Taxes had granted an allowance in respect of the daughter.
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(b) By a letter dated 27th October 1970 from the Inspector of Taxes to the Appellant the Inspector asked for further information of the daughter's income before the application for an allowance could be finally determined.
(i) That under s. 212(4) of the Income Tax Act 1952:
No relief shall be allowed under this section in respect of any child who is entitled in his own right to an income exceeding £70 a year: Provided that in calculating the income of the child for the purpose of this subsection no account shall be taken of any income to which a child is entitled as the holder of a scholarship, bursary, or other similar educational endowment.
(ii)
(iii) That under s. 13 of the Finance Act 1963:
Section 212 of the Act of 1952…shall have effect for the year 1964-65 and subsequent years of assessment as if subsection (4)…were amended by the substitution of the following for the words preceding the proviso:-(4) "In the case of a child who is entitled in his own right to an income exceeding £115 a year the appropriate amount for the child shall be reduced by the amount of the excess, and accordingly no relief shall be allowed under this section where the excess is equal to or greater than the amount which apart from this subsection would be the appropriate amount for the child:"…
(c) Between these two Acts there are four sections or subsections plus a Schedule that particularly govern the position, with others lending collateral support.
(d) That following the daughter's marriage she ceased to be a child within s. 212(4) of the Income Tax Act 1952 and s. 13 of the Finance Act 1963 and thus ceased to be the subject of the claim, Eileen Murphy.
(e) That on the daughter's marriage she ceased to be a daughter and became the wife of her husband. Thus it was incorrect for the Inland Revenue to say that she was a child for the remainder of the year under review for income tax purposes.
(f) That the daughter was not entitled to the income from the date of her marriage in her own right, but that by s. 354(1) of the Income Tax Act 1952 the income was that of her husband, and that the Appellant had no power to obtain from her or from her husband disclosure of her income.
(g) That if the daughter's income exceeded £115 per annum any reduction fell to be made in the year following her marriage; the Appellant had no power to obtain disclosure of her income by her husband.
6. It was contended by the Inspector of Taxes that:
(a) section 354 of the Income Tax Act 1952 was concerned only with the machinery of taxation;
(b) a married woman was not deprived by s. 354 of the Income Tax Act 1952 in favour of her husband of the right to receive income due to her;
(c) section 354 of the Income Tax Act 1952 was not relevant to the construction of s. 212 of the Income Tax Act 1952, as amended by s. 13 of the Finance Act 1963;
(d) a person who is a child for the purposes of s. 212 of the Income Tax Act 1952 is despite her marriage entitled in her own right for the purposes of s. 13 of the Finance Act 1963 to any income due to her under general law;
(e) the daughter was entitled in her own right during the year ended 5th April 1970 to the said total income of £280;
(f) the Appellant was therefore not entitled under the provisions of s. 13 of the Finance Act 1963 to the said child allowance; and
(g) the appeal should therefore be dismissed.
7. We were referred to: (a) Leitch v.Emmott 14 T.C. 633; [1929] 2 K.B. 236; (b) In reCameron 42 T.C. 539; [1967] Ch. 1.
8. We were satisfied:
(a) that the daughter remained a child within the meaning of s. 212(4) of the Income Tax Act 1952 and s. 13 of the Finance Act 1963 notwithstanding her marriage;
(b) that to support a claim to child allowance it was the Appellant's responsibility to satisfy H.M. Inspector of Taxes that he was entitled to such an allowance, and that the Appellant had failed to do so;
(c) that the definitions and logic introduced by the Appellant were not applicable to the section of the Income Tax Acts by which child allowance should be determined;
(d) that H.M. Inspector of Taxes was correct in disallowing the Appellant's claim to the child allowance in the absence of evidence in support of the Appellant's claims.
We therefore refused the appeal.
9. Immediately after the determination of the said appeal the Appellant expressed his dissatisfaction with our decision as being erroneous in point of law, and in due course required us to state a Case for the opinion of the High Court, which Case we have stated and do so sign accordingly.
10. The question of law for the opinion of the High Court of Justice is whether our decision in para. 8(d) was correct in law.
E. M. Stitcher, Ivan Tomlin, John Wagner Commissioners for the General Purposes of the Income Tax for the Division of Wembley
1st December 1972
The case came before Megarry J. in the Chancery Division on 6th and 9th April 1973, when judgment was given against the Crown, with costs.
Megarry J.-This is an appeal from the General Commissioners for the Division of Wembley. It raises a question of...
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