Pyrah (Inspector of Taxes) v Annis & Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE BIRKETT,LORD JUSTICE ROMER |
| Judgment Date | 12 December 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J1212-1 |
| Date | 12 December 1956 |
| Court | Court of Appeal |
[1956] EWCA Civ J1212-1
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls
Lord Justice Birkett
Lord Justice Romer
MR.CYRIL KING, Q.C. and SIR REGINALD HILLS (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, London, W.C.2.) appeared as Counsel on behalf of H.M. Inspector of Taxes,
MR F. HEYWORTH TALBOT, Q. C. and MR WILLIAM LINDSAY (instructed by Messrs. Stanley Wise & Company, 31, Hertford Street, London, W. l.) appeared as Counsel on behalf of Messrs, Annis & Company Limited.
The question which was raised in this case was whether the Appellant Company, Annis & Company Limited, could properly make a deduction, in ascertaining the sum for which they were liable to be taxed under Schedule in respect of their business as road haulage contractors of a sum of £1,272,the amount of legal charges fruitlessly (as it turned out) expended by them in an attempt to get a variation of what is called an "A" road license in the year 1952 so as to enable them, under that license, to operate three additional articulated vehicles,
The Case Stated, which Sir Reginald Hills described as being to some extent a labour-saving operation, expressed in the following three lines only the contention of the Company "It was contended on behalf of the Company that "the legal expenses were incurred in attempts to obtain replacement of the said "'A' license held before the war and as such were admissible expenses" The reference to "replacement" arises from the fact that originally in 1939 the "A" license which this Company had covered seven vehicles? they were, in fact, what are called rigid tipper vehicles; In 1952, when the abortive application was made, their "A" license, which, in the meantime, had been renewed with other variations, allowed but four articulated vehicles and the idea the Company had was to increase the figure of four to the figure of seven which originally had been the number allowed in the year 1939.
The answer to the contention so stated which the Crown put forward was that the "A" license was in the nature of a capital asset and that accordingly the legal expenses which had been incurred were capital expenditure not admissible in computing liability under Schedule D, The Commissioners, again observing their terse form, stated their conclusion simply thus - "that in view of the evidence produced before us the claim of the Company had "been established" -.
The Crown appealed to the High Court and the matter came before 'Mr. Justice Vaisey. Before him it is not in doubt that the Crown put forward and made the foundation of their argument the point which they had put to the Commissioners, namely, that this "A" license is a fixed capital asset in the business; the attempt which the Company made in 1952 was in truth to enlarge the capital asset which they had and, on those grounds, the claim of the Company to deduct the £1,272 was quite untenable. And so Mr. Justice Vaisey held.
Upon the matter of the license the learned Judge made use, in the course of his judgment, of expressions indicating that there was, to his mind, an analogy between the "A" license which a haulage contractor necessarily requires in order to carry on his haulage contracting business at all and the excise license which a publican requires in order that he may carry on the business of a public house but he had not before him any evidence as to the precise nature of an excise license and he drew attention in one passage of his judgment to the fact that he felt some embarrassment because in the Case Stated there was no material relating to publicans' excise license There was produced to him the "A" license under the Road and Rail Traffic Act, 1933 and the nature of that license is, I think, broadly speaking at any rate, not in doubt.
The necessity to obtain such a license arises under the Road and Rail Traffic Act of 1933 sad, as Mr. Talbot explained to us in opening the case, there are, for persons carrying on trades or businesses which require the use of motor vehicles, three classes of license-called "A", "B" and "C". The "A" license is the one peculiar to the requirements of a public carrier or a haulage contractor, such as are the present Appellants; for such a lioncel is required and designed to permit the use of the road vehicles which it specifies or otherwise indicates for the use of the public hauler or carrier of other people's goods; without such a license you cannot carry on lawfully such a business at all. Mr. Talbot pointed out that (as is apparent from the document which I have) the practice is - certainly as regards the actual power-driven vehicles -to specify in the license the precise vehicles which the haulage contractor desires to use. When it comes to the trailers which may be attached to the power-driven vehicles, then, more commonly, I understand, (as in this case), without specifying or identifying the exact trailers which the haulagecontractor desires to use, the license will authorize the use of a certain number - four, five or whatever it may be - and the contractor may only carry on his trade as a haulage contractor on the roads by use of the power-driven vehicles specified and with the limited number of trailers allowed
We have also been told that there is a certain strict control kept in this matter (as the experience of the present Appellants makes, indeed, manifest): you cannot, so to speak, go and intrude into this business with any very high prospects of success. Apparently the licensing authority is concerned to see that no more persons than are really necessary for the economy of the trade carry on this business and that no more vehicles are used in the business than are really required. So in this case the Appellants, who had carried on the business for some years, failed to get the authority to add to their fleet any one of the three additional articulated vehicles for which they sought authority.
One other matter of obvious fact may be mentioned in regard to licenses: as must be commonly experienced, these articulated vehicles, like other vehicles, in course of time wear out or may come to grief in other rays. It is, therefore, obvious that occasions may arise from time to time when a carrier's license which operates on the face of it for five years may require to be varied by substituting for one vehicle another.
Now, all that material was before the Judge and, having had his attention drawn to a number of cases, including case relating to excise licenses, the Judge at the end of his judgment (at page 862 of the Report in the All England Reports) said this: "It seems to me that, quite apart from the cases, the "matter must turn on ordinary principles. If a man buys or sells stocks and "shares and it is his business to buy and sell stocks and shares, then any "losses which he incurs or profits which he makes in the conduct of that "business are brought in as income profits or as part of his losses -in the "computation of his income in carrying on that business. On the other hand, "if his purchasing of stocks and shares is not his business but is something "which cannot be treated as the carrying-on of a trade, the profit or loss which "he makes in buying an investment is not part of his profit or loss in carrying "on any business," So far it is conceded that "those observations are unimpeachable.
He continues: "Here the purpose for which this sum of £1,272 was expended "was an attempt to make the fleet of lorries owned by the taxpayers more useful "and more advantageous as income-winning assets, which is not part of the "carrying on of the business at all. It was designed to improve the taxpayers' "capital position, and I think that this unsuccessful attempt to better the "capital position by obtaining the desired variation of the A license was "properly attributable in the accounts to capital and not to income."
Mr. Talbot drew attention to the words (which I somewhat emphasized in reading) - "which is not part of the carrying on of the business at all". On a strict scrutiny that views is not perhaps expressed with complete accuracy: for the operation of improving your capital asset may well be in one sense, of course, part of the conduct of your business. But, apart from that slight criticism (which is, I think, simply a criticism of terminology) as a statement of principle that paragraph again seems to me to be unimpeachable
Then come these final sentences: "I have hesitated about this case, "because I have had to draw inferences and make assumptions which may rest "on rather insecure foundations, but, having regard to all the circumstances "of the case, I think I am justified in dealing with the matter...
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