R v Income Tax Special Comrs.ex parte National Union of Railwaymen
| Jurisdiction | England & Wales |
| Judgment Date | 19 May 1966 |
| Date | 19 May 1966 |
| Court | Divisional Court |
HIGH COURT OF JUSTICE (QUEEN'S BENCH DIVISION, DIVISIONAL COURT)-
Income tax - Exemption - Trade union - "Provident benefits" -Income Tax Act 1952 (15 & 16 Geo. 6 & Eliz. 2, c. 10), ss. 440(2) and 441.
A trade union claimed repayment under ss. 440(2) and 441, Income Tax Act 1952, of tax deducted from dividends and interest applied in the years 1959-60 and 1960-61 in payment of "legal assistance benefits", being sums paid from its general fund (a) in respect of legal proceedings for damages and compensation for personal injuries sustained by members in the course of their work; (b) in connection with enquiries, arbitrations and other proceedings in respect of wage rates, conditions of work and redundancy; (c) on the staff salaries and other costs of the legal department of the union, as being "provident benefits" within s. 440(2). The Special Commissioners refused the claim. The union applied for an order of mandamus directing the Commissioners to allow the claim.
Held, that, whether or not the legal assistance benefits would have been "provident benefits" within s. 440(2) if paid out of a special fund, the claim failed because "provident benefits" in that subsection meant moneys paid out of the income of special funds into which money applicable to provident benefits is paid, and not out of a general fund.
(1) The name of the Applicant is the National Union of Railwaymen and its Head Office is situated at Unity House, Euston Road in the County of London.
(2) The Applicant is a Union of railway and ancillary workers of all grades and was registered as a trade union under the Trade Union Acts 1871 and 1948 on 29th March 1913, Register No. 8T.
(3) The relief sought is an Order of Mandamus to compel the Special Commissioners to allow the claims preferred by the Applicant in respect of the years of assessment 1959-60 and 1960-61 for exemption from and repayment of income tax in respect of the sum of £48,095 13s. 2d. expended by the Applicant in the year 1959-60 and the sum of £57,397 17s. 4d. expended by the Applicant in the year 1960-61 as legal assistance benefits out of taxed interest and dividends received by the Applicant.
(4) The grounds of the Application are that the said sums of £48,095 13s. 2d. and £57,397 17s.4d. constituted expenditure by the Applicant for the purpose of provident benefits and therefore that the Special Commissioners were bound
to allow the Applicant's claim for relief pursuant to Section 440(2) of the Income Tax Act, 1952.Dated the 10th day of December 1965
(signed) Pattinson & Brewer Solicitors for the Applicant.
30 Great James Street,
London, W.C.1.
I, Sidney Francis Greene, of Unity House, Euston Road in the Country of London, make oath and say as follows:
1. I am the General Secretary of the National Union of Railwaymen (hereinafter called "the Union") and I have been duly authorised by the Executive Committee of the Union to depose to the matters hereinafter set out.
2. The Union was registered as a trade union under the Trade Union Acts 1871 and 1948 on 29th March 1913, Register No. 8T, and is a union of railway and ancillary workers of all grades united to protect their interests and improve their conditions of work. The objects of the Union are set out in full in Rule 4 of the Union's Rules, and there is now produced and shown to me and exhibited herewith marked "S.F.G.1" and "S.F.G.2"(1) respectively copies of the Rules of the Union which were in force for the years of assessment 1959-60 and 1960-61 in respect of which the claim for relief hereinafter referred to was made.
3. At all material times the Union has provided out of its income provident benefits for its members and has made and been allowed claims for exemption from and repayment of income tax under the provisions of Section 440 (2) of the Income Tax Act 1952 and the corresponding earlier legislation.
4. For the years of assessment 1959-60 and 1960-61 the Union preferred claims for exemption from and repayment of income tax under the provisions of the said Section 440 (2) in respect of sums expended out of taxed interest and dividends received by the Union which were applicable and applied solely for the purpose of providing provident benefits. Included in these claims were sums of £48,095 13s. 2d. and £57,397 17s. 4d.in respect of the years 1959-60 and 1960-61 respectively which were applied as legal assistance benefits, as that term is hereinafter more particularly described. The Union claimed that the said sums qualified for relief as money applied for provident benefits within the provisions of the said Section 440 (2) but the Commissioners for the Special Purposes of the Income Tax Acts have refused any relief in respect of the said sums.
5. The legal assistance which is available to members of the Union is set out in Rule 12 of the Union's Rules. The legal assistance benefits which are claimed to be provident benefits leading to the admission of the said claims for exemption from and repayment of income tax are the benefits provided for members in respect of amounts paid in connection with (a) the institution
and prosecution of legal processes directed towards obtaining damages and compensation for personal injuries sustained by a member of the Union in the course of his work, and (b) enquiries, arbitrations and other processes in respect of matters of general concern to the Union and its members such as wage rates, conditions of work and redundancy.6. A member who sustains injury in the course of his work reports the matter in the first place to his branch secretary and the latter completes an accident report form and sends it to the head office of the Union with a request that a claim should be made. The matter is then dealt with by the legal and social service department of the Union, which obtain medical evidence, make necessary enquiries and conduct negotiations with the employer or his representative or any other person involved. In cases where there is a denial of liability or where no satisfactory offer can be obtained, the matter is put in the hands of solicitors. The injured member then in all cases gives a retainer to the solicitors in the following terms:
Re My Accident - 19…
I, of hereby retain you to act as my solicitors in this matter and I instruct you to proceed with an action claiming damages against
Dated this day of 19…
The solicitors then deal with the claim, taking such action as may be necessary, and their costs and disbursements are paid by the Union, credit being given for costs recovered from the defendants in successful cases. Costs awarded to defendants in unsuccessful cases are also paid by the Union. No set procedure is followed where the Executive Committee of the Union consider that it is necessary or desirable in the interests of the members for the Union to be represented at enquiries, arbitrations or in similar processes.
7. The expenditure so incurred by the Union during the years 1959-60 and 1960-61 was as follows:
1959-60 |
1960-61 |
|||||
£ |
s. |
d. |
£ |
s. |
d. |
|
Compensation and medical costs, a detailed analysis of which is now produced shown to me and exhibited herewith marked "S.F.G.3"(1) |
29,329 |
13 |
2 |
37,483 |
9 |
8 |
Costs incurred in connection with enquiries, arbitrations and similar processes, a detailed analysis of which is now produced shown to me and exhibited herewith marked "S.F.G.4"(1) |
14 |
0 |
0 |
769 |
7 |
8 |
Costs of the Legal Department of the Union, a detailed analysis of which is now produced shown to me and exhibited herewith marked "S.F.G.5"(1) |
18,752 |
0 |
0 |
19,145 |
0 |
0 |
48,095 |
13 |
2 |
57,397 |
17 |
4 |
8. The Union claims that the legal assistance benefits provided for members as hereinbefore set out constitute provident benefits within the provisions of the said Section 440 (2) according to ordinary English usage and by analogy with the provident benefits actually listed by way of example in the said subsection.
9. The Board of Inland Revenue declined to accept the Union's claims made in this behalf. On the 24th day of February 1964 the Union therefore made a claim for relief to the Commissioners for the Special Purposes of the Income Tax Acts and such claim was supported by an Affidavit sworn by me the material parts of which are reproduced in this my Affidavit.
10. On 1st December...
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