The Right Honourable Richard George Penn Curzon-Howe (Earl Howe) v The Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 16 April 1919 |
| Date | 16 April 1919 |
| Court | King's Bench Division |
NO. 405.-IN THE HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
COURT OF APPEAL-
Super-tax. - Total income. - Mortgage of life insurance policies with covenant by mortgagor to pay annual premiums. - Mortgagor not entitled to deduct amount of premiums so paid in estimating his total income for Super-tax purposes. - Finance (1909-10) Act, 1910 (10 Edw. 7, c. 8), Section 66. - Income Tax Act, 1842 (5 & 6 Vict. c. 35), Sections 164 and 190, Schedule G, Rule XVII.
The Appellant had conveyed by way of mortgage his life interest in certain settled estates, including in the security policies of insurance upon his own life upon which he covenanted to pay the annual premiums.
In the event of the Appellant failing to pay the premiums, the mortgagees were empowered to pay them and to charge the mortgaged property with the amount so paid.
The annual premiums had been duly paid by the Appellant.
Held, that the amount paid annually by the Appellant in respect of premiums on the mortgaged life insurance policies was not an "annual payment reserved or charged" on his income within the meaning of Section 164 of the Income Tax Act, 1842, and Section 190, Schedule G, Rule XVII of that Act, and that he was not entitled to deduct the amount paid as premiums in computing his total income for the purposes of Super-tax.
Stated under the Finance (1909-10) Act 1910, Section 72 (6) and Taxes Management Act 1880, Section 59 by the Commissioners for the Special Purposes of the Income Tax Acts for the Opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held at York House, Kingsway, London, W.C.2, on
19th April 1917, for the purpose of hearing Appeals The Right Honourable Richard George Penn Curzon-Howe (Earl Howe), G.C.V.O., (hereinafter called the Appellant) appealed against an assessment to the Super-tax in the sum of £27,466 for the year ended 5th April 1917 made upon him under the provisions of Section 66 of the Finance (1909-10) Act 1910.2. The Appellant claimed a deduction of £815 under the provisions of Section 66 (a) of the aforesaid Act. The Respondents did not contest this claim which was allowed by us-the assessment being thus reduced to £26,651.
3. From the said sum of £26,651 the Appellant claimed further deductions in respect of amounts paid by him as premiums on Policies of Assurance effected on his own life under the circumstances hereinafter set out. This claim was resisted by the Respondents and constitutes the sole point upon which the opinion of the High Court is now sought.
4. The Policies referred to under heading (a) in paragraph 5 below are Policies effected by the Appellant on his own life with various insurance companies and bear dates respectively in or between the years 1884 and 1896. The Policies referred to under (b) in paragraph 5 below are Policies effected by the Appellant on his own life with various insurance companies and bear dates respectively in or between the years 1883 and 1891.
5. The payments in question fall under the two following heads:-
(a) The Appellant by a series of deeds commencing 5th July 1902 granted his life interest in certain estates and also assigned the Policies of Assurance described in paragraph 4 above effected by him on his own life to the Guardian Fire & Life Assurance Company Limited by way of mortgage and further charge to secure sums advanced to him by the said Insurance Company each deed containing or incorporating a covenant to the effect that none of the said Policies of Assurance thereby mortgaged should become void or voidable and that he would not do or suffer anything whereby the Company might be prevented from receiving any of the moneys to become payable thereunder respectively or any part thereof and that if any of the said policies had or should become voidable he would immediately thereupon at his own cost do all things necessary for restoring or keeping on foot the same And that if any of the said policies or any new policy or policies to be effected as thereinafter mentioned had or should become void he would immediately thereupon at his own cost effect or enable the Company to effect a new policy or policies on his life in his or their name in such sum or sums as would have been payable under the policy or policies which should have become void if he had died And that every such substituted policy and the moneys to become payable thereunder should be subject to that security and the power of sale and other powers trusts and provisions contained in or incident to those presents in relation to the said original policies and the moneys to become payable thereunder and further that he would during the continuance of that security duly and punctually pay the annual premiums and other sums of money (if any) necessary for keeping on foot the said original policies and any substituted policy or policies when the same shall have become due or within one week thereafter and would forthwith deliver the receipt for every such payment to the Company and that if he should at any time neglect or refuse to make the payments aforesaid or any of them it should be lawful for the Company to pay the same and that all moneys and expenses which should be paid or incurred by the Company in keeping on foot the said original policies or any of them or in effecting or keeping on foot any such substituted policy or policies as aforesaid or otherwise with relation to the premises with interest for the same at the rate of 5 per cent. per annum from the time or respective times of the same having been paid or expended should be repaid to the Company by the Appellant on demand and until repayment should be charged upon the premises thereby mortgaged. A copy of the first of such deeds dated 5th July 1902 which may be taken as representative of the whole series, is annexed to and forms part of this Case.(1)
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(b) The Appellant in consideration of sums advanced to him by the the said Insurance Company and under the powers conferred upon him by an Indenture of Settlement dated 31st May 1883 (the Principal Indenture) had jointly with his father the late Earl appointed by an Indenture of Mortgage dated 1st March 1894 certain estates from and after the death of the late Earl to the use of the said Insurance Company by way of mortgage and upon the execution of such mortgage it was agreed that the present Earl (then Viscount Curzon) should assign to the said Insurance Company the Policies of Insurance on his own life described in paragraph 4 above and in such assignment there was contained a covenant by the then Viscount that he would not by any act or omission cause or allow any policy thereby assigned or any policy substituted therefor as thereinafter provided to become void or voidable and would during his life from time to time duly pay all money payable for keeping on foot every policy thereby assigned or any policy substituted as aforesaid or for restoring the same respectively if and when voidable and if any such policy should become void would effect on his life a new substituted policy or policies with such office and in such names or name as the Trustees or Trustee of the Principal Indenture should direct and for an amount equal to the sum which would have been payable under the void policy if it had not become void and the Viscount had then died, and would deliver and if necessary also assign every such substituted policy and deliver the receipt for every such payment to the Trustees or Trustee but subject to the right of any mortgage thereto and would not do or suffer any act or thing by means whereof the Trustees or Trustee might be prevented from receiving any money assured by any policy whether original or substituted subject to the trusts of those presents and that the life estate of the Viscount under the Principal Indenture should stand charged with all money thereby covenanted to be paid to him. A copy of the deed by which assignment was made dated 2nd
March 1894 and in which the Indentures of 31st May 1883 and 1st March 1894 are recited is annexed and forms part of this Case.(1)
The late Earl died on the 25th day of September 1900.
6. The Appellant has always himself paid the interest on the sums advanced by the said Insurance Company as mentioned in paragraph 5 above and in computing the said assessment to Super-tax for the year ended 5th April 1917, due allowance had been made for such interest. The Appellant has always himself paid the premiums upon the policies in question to the Insurance Company and from such payments no deduction has ever been claimed in respect of Income Tax. No allowance in respect of such premiums had been made in computing the said assessment for the year ended 5th April 1917.
7. At the hearing of the Appeal Counsel for the Appellant contended:
(2) that the payments of the premiums, being annual, and being payments which the Appellant under the covenants contained in the several deeds had covenanted to pay, are "annual payments" within the meaning of Section 164 of the Income Tax Act 1842, and within Rule 17 of Schedule G Section 190 of that Act, which sections are made applicable to super-tax by Section 66 (2) of the Finance (1909-10) Act 1910;
(3) that for the purposes of Super-tax the income to be estimated is the true and real income of the taxpayer after deducting annual interest or other annual payments reserved or charged thereon;
(4) that there is no distinction in principle between the annual premiums payable and paid by the Appellant and the annual mortgage interest which admittedly was properly deducted;
(5) that the Appellant had covenanted to pay the annual premiums and his income was charged with the payment thereof and that Section 36 (1) of the Finance Act 1916 had no application;
(6) that the principle stated...
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