Richardson v Worrall
| Jurisdiction | England & Wales |
| Judgment Date | 06 June 1985 |
| Date | 06 June 1985 |
| Court | Chancery Division |
Chancery Division.
Mr. I. Glick (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. P. Whiteman Q.C. (instructed by Messrs. Watson Farley & Williams) for Mr. Worrall.
Mr. J. McDonnell Q.C. and Mr. R. Mathew (instructed by Messrs. Speechly Bircham) for Mr. Westall.
Before: Scott J.
Income tax - Schedule E - Emoluments from office or employment - Expenses - Expenses incurred other than in performance of employee's duties - Employer paid for petrol used by employee for private motoring - Petrol purchased by credit card provided by employer with employee as signatory - Employer paid debt due on credit card - Whether value of petrol so provided amounted to money's worth - Whether employer discharging debt for which employee personally liable - Whether value of petrol was an emolument of employment - Income and Corporation Taxes Act 1970 section 181Income and Corporation Taxes Act 1970, sec. 181.
These two appeals, heard consecutively but with one combined judgment, concerned the same point of law, namely, whether, when an employer provided an employee with credit card facilities to enable him to obtain petrol for private motoring at no cost to himself, the employer was thereby providing the employee with an emolument taxable under Sch. E. In the Worrall case the Crown appealed against a finding of the Special Commissioners in favour of the taxpayer. In the Westall case, on the same point of law, a different body of Special Commissioners found in favour of the Crown. The taxpayer appealed.
In each case the taxpayer's employer provided the taxpayer with credit card facilities to enable him to purchase petrol for both business and private motoring. The credit card was issued to the employer with the employee being merely an authorised user of the card. The employee incurred no liability to discharge the indebtedness incurred by his use of the card. No liability arising out of the use of the card fell upon the taxpayer with the arrangement enabling him to obtain petrol for private motoring at no cost to himself. Under the contractual arrangements for the use of the card the bank, or finance company issuing it, became liable to pay the garage from which the petrol had been purchased by means of the card. The employer to whom the card had been issued became liable to reimburse the bank.
In the Worrall case the taxpayer's employer made arrangements for employees to obtain petrol by means of an All Star card. Such a card was provided by the employer for the taxpayer who was the authorised signatory although the company's name was printed on the card. No limit was placed on the private mileage done by the taxpayer in his company car and he was entitled to use his All Star card for purchasing fuel for his car without limit. If the taxpayer paid for petrol with his own money he was not reimbursed by his employer.
The taxpayer was assessed to tax in respect of the cost of the petrol he purchased with his All Star card during the year 1981-82. The total cost was £675 but he was permitted a deduction of £187 in respect of business travel. The taxpayer appealed to the Special Commissioners who, in allowing his appeal, held that he never became personally liable for the petrol. In purchasing petrol by means of his All Star card he was acting as an agent of his employer with the result that the petrol belonged to his employer rather than to the taxpayer himself. Therefore, the petrol was a benefit in kind that was not convertible into money by the taxpayer and not, therefore, a taxable benefit.
The Crown appealed to the Chancery Division submitting that the petrol was not purchased by the taxpayer as agent for his employer. It was further submitted that the taxpayer used the All Star card in order to discharge his own liability for the petrol which he had purchased. In providing the taxpayer with the card his employer provided him with the means to discharge his debts incurred in the purchase of petrol. It was also argued that the case was no different from any other in which an employer discharged an employee's debt, in as much as the taxpayer received money's worth equal to the amount of the debt, payment of which he had avoided by use of the All Star card. The taxpayer's main submission was based on the agency principle which, it was argued, showed that the employer and employee had a joint liability which was discharged by the employee's use of the credit card. It was agreed that the contract for the sale of the petrol was concluded when the petrol entered the tank in the taxpayer's car.
In the Westall case the taxpayer was provided with the use of two cars by his employer. He was entitled to use both cars for business and social purposes. This entitlement extended to free use of the cars by his wife for social purposes only. The taxpayer was supplied by his employer with a Barclaycard which he was able to use for the purchase of fuel for either car. His wife was issued with a Barclaycard on similar terms. A limit of £150 per month was placed on the use of the cards. In the year in question, of the mileage covered by the cars, 45% was attributable to business use by the taxpayer. In the event of the taxpayer or his wife purchasing petrol with cash, the employer would reimburse them on production of receipts signed by the garage which sold the petrol. The taxpayer was assessed to tax under Sch. E in respect of the price of petrol used by him and his wife for social purposes and paid for by their Barclaycards. On the taxpayer's appeal to the Special Commissioners the assessments were upheld. He appealed to the Chancery Division contending that when purchasing petrol with the Barclaycard he never incurred any liability at all to pay for the fuel. It was submitted t hat the method of payment was an important part of the contract of sale, with no final contract being concluded until the taxpayer had gone to the till and arranged to have his credit card accepted or had paid in cash. The taxpayer incurred no personal liability to pay. The Crown argued that the contract was concluded when the petrol entered the taxpayer's tank. Alternatively, the fact that the taxpayer was entitled to reimbursement of all cash sums expended on petrol within the £150 limit meant that he could obtain cash from his employer and that this amounted to cash in the taxpayer's hands.
Held, the Crown succeeding on both appeals:
Worrall Case:
1. In purchasing fuel for private motoring in his company car by means of the All Star card, the taxpayer discharged his own immediate liability to the garage. That discharge represented money's worth in his hands equal to the discharged liability. It therefore amounted to an emolument of his employment and was subject to tax under Sch. E.
2. There was no evidence to support the proposition that in purchasing petrol with the credit card the taxpayer was acting as the agent of his employer. Even if he had been so acting the provision of the petrol would still have been a taxable emolument as, when the petrol entered the taxpayer's car, thus forming the contract of sale, he would have been jointly liable with his employer as undisclosed principal for the purchase price of the fuel.
Westall Case:
1. When the taxpayer or his wife purchased petrol by means of the Barclaycard provided by the taxpayer's employer they incurred a personal liability. For the same reasons expressed in the Worrall case, the discharge of that liability represented money's worth to the taxpayer and was therefore a taxable emolument.
2. By paying for the petrol with cash and obtaining a refund from his employer the taxpayer could turn the arrangements to pecuniary account. Reimbursement by the employer in this way plainly represented money's worth.
1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 31 October, 1 and 8 November 1983 Kevin Alexander Worrall (hereinafter called "Mr. Worrall") appealed against an assessment to income tax in the sum of £10,602.
2. The question reported to us, the issues which emerged during the hearing, our findings of fact on the evidence adduced, the respective contentions of Mr. P.G. Whiteman Q.C. on behalf of Mr. Worrall and Mr. A. Wheaten on behalf of the Crown and our determination in principle are set out in our decision which was issued on 6 December 1983 and a copy of which is annexed as part of this case.
3. [Paragraph 3 set out the witnesses who gave evidence.]
4. [Paragraph 4 set out the documents proved or admitted before the Commissioners.]
5. The following cases were cited in argument in addition to those mentioned in our decision:
Brumby H.M.I.T. v. Milner TAX(1976) 51 T.C. 583
Glantre Engineering Ltd. v. Goodhand H.M.I.T. TAXUNK[1983] BTC 396, [1982] 1 All E.R. 542
6. Following our decision in principle figures were agreed between the parties on 10 January 1984 and on 23 January 1984 we adjusted the assessment accordingly.
7. The appellant immediately after the determination of the appeal declared to us his dissatisfaction therewith as being erroneous in point of law and on 31 January 1984 required us to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970 section 56Taxes Management Act 1970, sec. 56 which case we have stated and do sign accordingly.
8. The questions of law for the opinion of the court are:
1. Whether we were correct in holding that purchases of petrol made by Mr. Worrall using the charge card supplied to him by his employer were made as agent for his employer and not on Mr. Worrall's own account.
2. Whether we were correct in holding that although free private motoring constituted a benefit made available to Mr. Worrall by his employers did not constitute part of his emoluments chargeable to tax pursuant to Income and Corporation Taxes Act 1970 section 183Income and Corporation Taxes Act 1970, sec. 183.
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