Peter Reid v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 05 August 1947 |
| Date | 05 August 1947 |
| Court | Court of Session (Inner House - First Division) |
NO. 1388-COURT OF SESSION (FIRST DIVISION)-
Income Tax, Schedules B and D - Poultry farming in part run on the intensive or battery system - Whether assessable wholly or in part under Schedule D.
The Appellant occupied 12 acres of land and buildings wholly for the business of poultry farming. The buildings had accommodation for a total of 2729 birds. All the birds were home bred and up to the age of seven months were kept in poultry houses from which they had access to a substantial grass field. About one-third of the total number of birds were then selected for the intensive or battery system and kept in cages with no access to the land for about twelve months, after which they were sold for the table. The remainder were kept in poultry houses each of which had two grass runs used alternately. Day-old chicks were also sold. No part of the land was cultivated to produce food for the poultry and, apart from the sustenance derived from the grassland by the birds having access thereto, all the birds were fed entirely on purchased food.
On appeal to the General Commissioners against assessments under Case I, Schedule D, the Appellant contended that the hens in the batteries had earlier and for a substantial period obtained material sustenance from the land; that his business was poultry farming and the land was occupied for the purpose of husbandry, and that the whole of the profits were assessable under Schedule B. The Crown contended that the land was not occupied for the purpose of husbandry and the whole of the profits were assessable under Case I of Schedule D, or alternatively that the part of the business run on the battery system was not husbandry, and the profits thereof were assessable under Case I of Schedule D. The General Commissioners held that the profits were to be apportioned, the profits arising from the battery system being chargeable to Income Tax under Schedule D and the profits from the ordinary poultry farm under Schedule B.
Held, (Lord Keith dissenting), that the facts did not justify the separation, for assessment to Income Tax under Schedule D, of the part of the business run on the battery system from the remainder of the poultry farm assessable under Schedule B.
At a meeting of the Commissioners for the General Purposes of the Income Tax for the Division of the Middle Ward of the County of Lanark held at Hamilton on 13th December, 1945, Peter Reid, poultry rearer, Clapperhowe Farm, Motherwell, in the County of Lanark (hereinafter called "the Appellant") appealed against additional estimated assessments to Income Tax in respect of profits from his business of poultry rearer on the sum of £1,000 made upon him for each of the seven years ending 5th April, 1939, to 5th April, 1945, inclusive, under Case I of Schedule D of the Income Tax Act, 1918.
I. The following facts were admitted or proved :-
(2) The Appellant is the occupier of land at Clapperhowe Farm, Motherwell, extending to 12 acres, the annual rent payable being £50. The Appellant carries on the business of poultry rearing on the said land, which is wholly utilized for that purpose.
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(3) No part of the land is cultivated to produce food for the poultry and, except what they derive by way of sustenance from the grass land on which they run, the whole of their food is purchased from outside. There are a barn, hay shed and a considerable number of poultry houses erected on the land having a total capacity for 2729 birds as follows :-
Barn used as battery house containing
Capacity
384 cages.
384
Hay shed used as battery house
containing 240 cages.
240.
1 intensive house 60 ft. × 15 ft.
250
874
1 semi-intensive house 30 ft. × 12 ft.
120
11 poultry houses 12 ft. × 12 ft. (60)
660
6 ,, 20 ft. × 10 ft. (75)
450
25 breeding pens 7 ft. × 7 ft. (25)
625
2,729
(4) There are in addition the following rearing appliances :-
(5) Incubators: 1 "Secura", capacity 2000 eggs.
(6) 6 "Glevums", " 150 eggs each.
(7) 20 night arks.
(8) 4 chicken rearers 6 ft. × 4 ft.
(9) 6 " " 6 ft. × 3 ft.
(10) Of the total number of birds approximately one-third are worked on the intensive or battery system for the production of eggs, being from the age of seven months constantly kept in cages from which they have no access to the land and being fed entirely on purchased foods. Until ready to go into the intensive or battery system, the birds, which have all been bred from the Appellant's own stock, are kept in houses from which they have access to a substantial grass field on which they run. The grass is cut from time to time. After about a year in the intensive or battery system the hens are sold for the table. The remaining birds are kept in poultry houses and are fed on purchased foods. Each poultry house has two grass runs which are used alternately so as to keep the runs fresh and clean. Day-old chicks are also sold but no eggs are hatched for customers.
(11) For the years 1938-39 to 1941-42, inclusive, the Appellant had been assessed under Schedule B of the Income Tax Act, 1918, on the annual value of the land occupied by him, and for 1942-43 and subsequent years on three times the said annual value in terms of Section 28 (2) of the Finance Act, 1942. No question of figures was discussed before us, it being agreed that they could be left over until the question of principle had been decided.
II. It was contended on behalf of the Appellant:-
(2) That, although the hens while in the batteries were fed entirely on purchased food, nevertheless they had themselves earlier and for a substantial period obtained material sustenance from the land.
(3) That the business carried on by him was that of poultry farming and the land was occupied by him for the purpose of husbandry.
(4) That it was improper to separate the profits derived from the intensive or battery system from the profits derived from the ordinary system of poultry farming and that he fell to be assessed under Schedule B only in respect of the whole profits of his business.
III. H.M. Inspector of Taxes (Mr. A.H. Middlemast) contended on behalf of the Crown (inter alia) :-
(2) That the Appellant's profits were wholly assessable to Income Tax under Case I of Schedule D of the Income Tax Act, 1918; alternatively,
(3) that the poultry worked on the intensive or battery system did not derive their sustenance from the produce of the land occupied and this part of the Appellant's business was not husbandry, and the profits derived therefrom accordingly fell to be assessed under Case I of Schedule D.
IV. The following cases were referred to:-
Lean and Dickson v. Ball, TAX1926 S.C. 15; 10 T.C. 341
Jones v. Nuttall, TAX10 T.C. 346
Long v. Belfield Poultry Products, Ltd. (in liquidation), and
Thornber Brothers, Ltd. v. Macinnes, TAX21 T.C. 221
V. We, the Commissioners who heard the appeal, held that an apportionment fell to be made between Schedule D and Schedule B, the profits arising from the intensive or battery system being charged under Schedule D and the profits from the ordinary poultry farm under Schedule B.
VI. The Appellant immediately after the determination of the appeal declared to us his dissatisfaction therewith as being erroneous in point of law and, in due course having required us to state a Case for the opinion of the Court of Session as the Court of Exchequer in Scotland, this Case is stated and signed accordingly.
VII. The question of law for the opinion of the Court is whether the profits derived from the intensive or battery system are properly chargeable to Income Tax under Case I of Schedule D of the Income Tax Act, 1918.
HENRY A. BAIRD, J. MACGREGOR, ROBERT BRYCE WALKER Commissioners for the General Purposes of the Income Tax Acts.
Hamilton, 14th January, 1947.
The case came before the First Division of the Court of Session (Lords Carmont, Russell and Keith) on 15th and 16th July, 1947, when judgment was reserved. On 5th August, 1947, judgment was given against the Crown (Lord Keith dissenting), with expenses.
Edinburgh, 5th August, 1947. The Lords having considered the Case, Answer the Question of Law in the Negative: Allow the Appeal: Recall the determining of the Commissioners...
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