Reid's Brewery Company v Male
| Jurisdiction | England & Wales |
| Judgment Date | 09 February 1891 |
| Date | 09 February 1891 |
| Court | Queen's Bench Division (Administrative Court) |
Revenue - Income Tax - Profits of Trade - Brewers carrying on Business of Bankers and Money-lenders - Bad Debts on Loans - Deduction from Profits of Brewery - 5 & 6 Vict. c. 35, s. 100, Sched. D - 16 & 17 Vict. c. 34.
The appellants carried on the business of brewers, and also as a branch or adjunct of their brewery business, the business of bankers and money-lenders, and in the course of such business lent money to their customers on security, and received money on deposit from their customers, who were allowed to draw bankers' cheques or orders on the appellants. In no case was any loan or advance made by way of permanent investment, but the same was taken only in connection with the current dealings and transactions of the customer with the appellants, and, in the event of such current dealings or transactions terminating, the loan or advance was required to be paid off, and the account closed. The profits of the brewery were largely increased by the addition of the banking and money-lending business, and the loans were necessary to enable the appellants to realize profits. They claimed to deduct from an assessment to the income tax on profits from trade, bad debts in respect of loans to customers:—
Held (distinguishing Watney v. Musgrave (5 Ex. D. 241)), that, on the facts above stated, the appellants must be taken to have carried on one business only, that the money advanced to customers was used in the business, and not capital invested, and that the appellants were entitled to the deduction claimed.
CASE stated by Commissioners of Income Tax on appeal against an assessment made by them under Sched. D of 16 & 17 Vict. c. 34, in respect of the profits from trade as carried on by the appellants at their brewery, Clerkenwell Road, Middlesex.
It appeared that in the return made by the appellants for assessment certain items in respect of “bad debts” incurred in 1886, 1887, and 1888, had been deducted in arriving at the balances of profit upon which the return had been computed. These “bad debts” embraced not only ordinary debts arising from the trade of brewers, but also losses sustained on loans advanced by the appellants on the security of public-houses, with which their business was largely connected, to their customers (that is, persons who dealt or who had agreed to deal with the company). The average amount of these losses on loans for the three years 1886, 1887 and 1888 — as stated by the appellants — was 16,517l. The Special Commissioners disallowed the deduction of 16,517l., and consequently assessed the appellants for their brewery profits under Sched. D in the sum of 110,213l., being the amount of profits returned by the company, with the addition thereto of the 16,517l.
At the appeal, in answer to an inquiry in what way the losses arose, one of the appellants stated that when they made an advance to a customer on the security of a public-house, and the public-house was sold, if the security did not realize the amount advanced, the company wrote off the loss as a bad debt.
The following statement of facts was made by the appellants as explanatory of their case:—
(1.) “Messrs. Reid & Co., for many years prior and up to the 7th of July, 1888, carried on the business of brewers, and in connection therewith and as part thereof the branch business of bankers and money-lenders, limited to the customers and connections of the firm.
(2.) “The appellants took over the business of Reid & Co. by purchase and valuation, including therein the business or branch business of bankers and money-lenders.
(3.) “It was the custom, habit, and usual practice of manufacturing brewers, at any rate in London, to carry on the business of bankers and money-lenders as a branch or adjunct of their brewing business, such business being strictly carried on with the customers and connections of the brewery.
(4.) “Since the purchase and transfer, the appellant company has, pursuant to sub-s. 10 of art. 4 of their memorandum of association, also carried on the business of bankers and money-lenders as therein authorized.
(5.) “In the course of such business Messrs. Reid & Co. and the appellants advanced money by way of loan or advance to or on behalf of their customers, and upon various classes of security, and amongst others on deposit of deeds, on mortgage, on promissory notes, and on acceptances. They received money on deposit from their customers, and cheques or orders were allowed to be drawn upon the appellants which were accepted and treated by other London bankers as ordinary bankers' cheques. They also collected bills for customers when they became due.
(6.) “In no case was any loan or advance made by way of permanent investment, whether by way of deposit of deeds, mortgage, promissory note, or otherwise, but the same was taken only in connection with the current dealings and transactions of the customer with the appellants; and in the event of such current dealings or transactions terminating, the loan or advance was required to be paid off, and the account closed.
(7.) “The brewing profits of the appellants and of Reid & Co. has always been greatly increased by reason of the addition of such business of banking and money-lending as above described; and to enable them to realize their extensive profits, such loans and advances were essentially necessary, and unless such loans and advances were made for customers, the brewing business of London brewers could not be carried on at a profit.
(8.) “It has always been the practice of Messrs. Reid & Co., and subsequently of the appellants, to make returns and pay income tax on profits arising from banking and money-lending, and if on revaluation of loans any sums written off or undervalued in the...
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... ... Ramsay (WT) Ltd v IR CommrsELR [1982] AC 300 ... Reid's Brewery Co Ltd v MaleTAX (1891) 3 TC 279 ... Robinson (HMIT) v Scott Bader Co LtdTAX (1981) 54 TC 757 ... ...
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Absalom v Talbot
...v. Birrell, (1932) 1 K.B. 271, the allowances were made by agreement, and no such question was raised, much less decided, while in Reid's Brewery Co. v. Male, (1891) 2 Q.B. 1, it was only by holding that the brewers carried on banking and moneylending as a branch of their business that th......
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...the trade; (5) the assessment should be confirmed. 10. The following cases were referred to by the Company:-Reid's Brewery Co. Ltd. v. Male 3 TC 279; [1891] 2 QB 1; Morley v. Lawford and Co. 14 TC 229;Jennings v. Barfield 40 TC 365; [1962] 1 WLR 997;Commissioners of Inland Revenue v. Carron......
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Absalom v Talbot (HM Inspector of Taxes)
...the allowances were made by agreement, and no such question was raised, much less decided; while in Reid's Brewery Co., Ltd. v.Male, [1891] 2 Q.B. 1; 3 T.C. 279, it was only by holding that the brewers carried on banking and moneylending as a branch of their business that the Court found th......