Revell (Surveyor of Taxes) v The Edinburgh Life Insurance Company
| Jurisdiction | England & Wales |
| Date | 1903 |
| Year | 1903 |
| Court | Exchequer |
NO. 286.-COURT OF EXCHEQUER (SCOTLAND), FIRST DIVISION.-
Income Tax. - Schedule D (3rd and 4th Cases). A Life Insurance Company derives the bulk of its gross income from taxed sources. The amount of this taxed income exceeds the Company's net profits. The Company receives in addition certain interest from which tax is not deducted.
Held, that this interest is properly assessable under Cases III. and IV. of Schedule D in Section 100 of the Act 5 and 6 Vict. cap. 35.
At an adjourned meeting of the Commissioners for the General Purposes of the Income Tax Acts, and for executing the Acts relating to Inhabited House Duty for the County of Edinburgh, held at Edinburgh on the 8th day of May 1905.
The Edinburgh Life Assurance Company No. 22 George Street, Edinburgh (hereinafter referred to as "the Company"), appealed against an assessment of £56, 3s. of duty made upon it for the year 1904-5, under Schedule D of the Income Tax Acts, in respect of a sum of £1123 of untaxed interest, derived by it from its investments.
The assessment was made under 5 and 6 Vict. cap. 35, section 100, Schedule D, third and fourth Cases; 16 and 17 Vict. cap. 34, section 2; and 4 Edw. 7, cap. 7, section 7.
1. The following facts were admitted or proved:-
(a) The Company (which is a proprietary one) carries on the business of life insurance, and derives a considerable portion of its income from interest on its investments.
(b) The untaxed interest, that is, interest from which income tax had not been deducted at its source, and which had not been otherwise specifically charged, derived by the Company from its investments, and paid to it in the United Kingdom for the year ending 31st December 1903, amounted to £1123.
(c) The Company and the Surveyor of Taxes agreed and represented to the Commissioners that if it be held that liability to assessment exists, the said sum of £1123 was the assessable amount of untaxed interest for the year 1904-5, and chargeable to the extent of £266, 10s.under the third Case, and of £856, 10s. under the fourth Case in Schedule D of the Income Tax Acts.
(d) Both for the year 1903-4 and the year 1904-5 the Company was assessed in respect of its untaxed interest, not on profits under 5 and 6 Vict. cap. 35, section 100, Case 1, but on interest under 5 and 6 Vict. cap. 35, section 100, Cases 3 and 4, and 16 and 17 Vict. cap. 34, section 2.
-
(e) For the year 1904-5 the Company returned its income for the purposes of the Income Tax Acts as "nil." At the same time it made a claim, under section 23 of the Act 53 and 54 Vict. cap. 8, for repayment of income tax paid on £41,827 for the year 1903-4, on the ground of the loss shewn by the following profit and loss account for the years 1901, 1902, and 1903:-
Dr.
1901.
1902.
1903.
Claims under policies
£262,834
£238,412
£295,096
Intermediate bonus,
deduct
4,488
deduct-
4,831
add-
86
£258,346
£233,591
£295,182
Surrenders
12,622
18,104
30,823
Annuities
40,691
43,561
43,223
Commission
10,763
12,115
11,212
Expenses of manage-
ment
29,383
30,926
32,460
£351,805
£338,287
£412,900
Cr.
Premiums and con-
sideration for an-
nuities
£323,319
£325,596
£331,390
Less increase in lia-
bility applicable to
year
39,535
59,194
3,924
£283,784
£266,402
£327,466
Assignment fees
123
138
144
Profit on realisations
2,852
£283,907
£269,392
£327,610
Balance-Loss
£67,898
£68,895
£85,290
Deduct-
1. Amount already
taken credit for
in return for an-
nuities
15,836
16,630
16,354
£52,062
£52,265
£68,936
2. Book Entries in
interest account
2,351
2,287
1,706
£49,711
£49,978
£67,230
3. Foreign interest
not remitted to
the United King-
dom, and not
taxed
18,066
20,913
24,280
£31,345
£29,065
£42,950
4. Other interest not
taxed
1,123
£31,645
£29,065
£41,827
(f) Average loss for the three years-£34,179.
(g) This account does not include income taxed at its source.
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(h) The Commissioners refused the aforesaid claim for repayment, on the ground that the Company's income, taxed at its source, formed part of its trade profits; and that when it was taken into account there was, instead of a loss, a profit for the year of £66,976, as shewn by the following abstract:- Abstract of Accounts, year ended 31st December, 1903.
Expenditure.
Revenue.
Expenses, including claims,
Receipts, other than in-
etc.
…
£412,815
terest, etc.
£331,534
Intermediate bonus
86
Interest-Cross en-
Increase in liability
3924
tries
£1,706
Balance
…
66,976
Foreign interest not
remitted
24,280
Untaxed interest 1123
Taxed interest al-
ready taken credit
for in arriving at
liability re annui-
ties …
16,354
Taxed income
108,804
152,267
£483,801
£483,801
2. The Company, represented by Mr. Cheyne, W.S., contended that in considering this Appeal the Commissioners must have in view their decision in the application for repayment under the 1890 Act. In the discussion on that application, the Company maintained that, in terms of section 23 (1) of the Act, the loss in trade and the aggregate amount of income are to be "estimated according to the several rules and directions of the Acts relating to Income Tax"; that the account submitted by the Company, and quoted on page 4, shewed a loss of £41,827, after taking into...
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