Nash (Inspector of Taxes) v Tamplin & Sons Brewery Brighton Ltd ; Davies (Inspector of Taxes) v Webbs (Aberbeeg) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Morton of Henryton,Lord Reid,Lord Radcliffe,Lord Tucker |
| Judgment Date | 25 October 1951 |
| Judgment citation (vLex) | [1951] UKHL J1025-3 |
| Court | House of Lords |
[1951] UKHL J1025-3
House of Lords
Lord Morton of Henryton
Lord Reid
Lord Radcliffe
Lord Tucker
Lord Asquith of Bishopstone
Upon Report from the Appellate Committee, to whom was referred the Cause Nash (Inspector of Taxes) against Tamplin & Sons Brewery, Brighton, Limited, that the Committee had heard Counsel, as well on Tuesday the 17th, as on Wednesday the 18th, Thursday the 19th, Monday the 23d and Tuesday the 24th, days of July last, upon the Petition and Appeal of Leonard Alfred Nash (His Majesty's Inspector of Taxes), of Princes Place. Brighton, 1, 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 10th of May 1950, 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 Tamplin & Sons Brewery, Brighton, Limited, 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, in the name of the House of Lords, by the Lords of Appeal sitting in the House of Lords during the Dissolution of Parliament, by virtue of a Writing by Her Majesty the Queen and Her Royal Highness the Princess Elizabeth as Counsellors of State on behalf of His Majesty, dated the 5th day of October 1951, pursuant to the provisions of the Appellate Jurisdiction Act, 1876, That the said Order of His Majesty's Court of Appeal, of the 10th day of May 1950, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
Lord Morton of Henryton (Nash v. Tamplin)
My Lords,
This appeal arises out of additional first assessments made upon the Respondents for the year 1942-3 in the sum of £32,033, and for the year 1943-4 in the sum of £32,790, under Schedule D Case I and section 125 of the Income Tax Act, 1918, in respect of their profits as brewers.
The Respondents are the lessees of a number of licensed houses, the freeholder whereof is Tamplin's Licensed Properties Limited, a wholly-owned subsidiary company of the Respondents. These houses are held by the Respondents as lessees under an agreement for lease dated 1st June, 1938, for a term of 61 years computed from the 1st October, 1933. Some of the houses were retained by the Respondents under their own management, but others were sublet by the Respondents to "tied" tenants under agreements whereof a specimen is exhibited to the Case stated. By Clause "P" of each of these agreements the tenant and licensee of the public house entered into the usual undertaking to purchase solely and exclusively from the Respondents all the ale, beer, stout and other malt liquor and all wines, spirits and mineral waters which should be required for sale in or out of the premises, and by Clause "Q" he entered into an undertaking not to buy from any other source than the Respondents.
It is common ground between the parties to this appeal that the terms of the said specimen agreement are those commonly to be found in tenancy agreements between brewers and their "tied" tenants and that the Respondents entered into these tenancy agreements for the purpose of obtaining a better market for their beer. It is also common ground that if the Respondents had chosen to let the same houses under agreements which omitted the "tie" clauses but were in other respects the same as the specimen agreement, they could have obtained higher rents than those which they obtained from the tied tenants. Lastly, it is common ground that up to the date when the Finance Act, 1940, came into operation, the facts just stated entitled the Respondents to make a certain deduction in computing the amount of their profits under Case I of Schedule D of the Income Tax Act, 1918. The deduction is commonly called "the Usher deduction" or "the Usher allowance", as the right to make it was first established by the decision of this House in Usher's Wiltshire Brewery Limited v. Bruce [1915] A.C. 433, 6 T.C. 399.
So far the parties are in agreement. I must now state the difference of opinion which has given rise to this appeal. The Crown contends that by reason of the decision in Usher's case the Respondents were entitled, in computing their profits under Case I of Schedule "D" of the Income Tax Act, 1918, to deduct the amount of the rent paid by them to the freeholders for each licensed house let to a "tied" tenant less the rent received by them from each "tied" tenant. The Crown further contends that the rents paid by the Respondents to the freeholders were "rents under long leases" within section 17 (1) of the Finance Act, 1940, and that by reason of subsection (2) of the same section, the Respondents ceased to be entitled to make the deduction just mentioned when the Act of 1940 came into force. The Respondents agree that the rents paid by them to the freeholders are "rents under long leases" within section 17 subsection (1) of the Act of 1940, but they say that the deduction which they were entitled to make under the decision in Usher's case was not the difference between the rents paid by them to the freeholders and the rents received by them from the "tied" tenants but the difference between the rents which could have been obtained for the licensed houses in question if they had been let to tenants free from the "tie" imposed by Clauses "P" and "Q" already quoted and the rents which they in fact obtained from the "tied" tenants. They further contend that section 17 of the Act of 1940 has no effect upon this right, since they do not seek to deduct any "rents under long leases"; what they were and are entitled to deduct in the case of each house is the notional rent which could have been obtained from a "free" tenant, less the rent paid by the "tied" tenant.
My Lords, it will be apparent that it is necessary to consider Usher's case with some care, in order to ascertain what was in fact decided by your Lordships' House.
The rule which had to be considered by this House in Usher's case is to be found in Section 100 of the Income Tax Act, 1842, and is incorporated by reference in the Income Tax Act, 1853. It is Rule 1 of the Rules applying to Cases I and II of Schedule D and there is no material difference between that rule and the rule which applies in the present case, Rule 3 ( a) of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918. Under both the old Rule and the present Rule it has to be decided whether the sum sought to be deducted is "money wholly and exclusively laid out or expended for the purposes of" the trade in question.
In Usher's case the facts were the same as in the present case, except that the brewers owned the freehold of some of the houses let to tied tenants and were leaseholders of others of these houses. They appealed against an assessment made on them in respect of the profits of their trade, and claimed to have the assessment reduced by ( inter alia) a sum of £2,134 14s. 6d. described by them as the "difference between rents of leasehold houses or Schedule 'A' assessment of freehold houses on the one hand, and rents received from 'tied' tenants on the other hand." It is worthy of note, however, that in the brewers' Contention C, set out at p. 437, fin. of the report it was pointed out that the tied tenants paid "a much less rent than the full annual value of the premises," and the following paragraph appears in a supplemental Statement of Facts agreed between the parties and signed in pursuance of an Order of Horridge, J.
"2. In consideration of the 'tie' contained in the tenancy agreement the Appellants let the tied houses at considerably less than their annual value or what they could get for them without such a tie and in the case of houses rented by them also below what they pay for the rent thereof themselves. Such letting is made by them deliberately and solely in order to get the trade which the using of such houses as tied houses affords and by means of so doing they are enabled to make a profit on their total trading transactions by reason of the increased sale of their beer and other goods. The letting at less than the annual value or head rent is not due to a change in the value of the premises. The figures in question represent the difference between the rents received by the Appellants on the one hand and
(i) in the case of their freehold houses, the net Schedule A Assessments ;
(ii) in the case of their leasehold houses, the rents paid by them.
If it should be held that in case (ii) the net Schedule A Assessment is the proper figure, it can be ascertained."
This House unanimously allowed the deduction claimed, as being money "wholly and exclusively laid out or expended for the purposes of" the brewers' trade. But the opinions delivered must be studied with care, as two alternative views of these opinions have been put forward in argument. Counsel for the respondents contend that what was allowed to be deducted, both in the case of the freeholds and in the case of the leaseholds, was the difference between the rents which were in fact obtained from the "tied" tenants and the notional rents which could have been obtained if the same premises had been...
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