Thomson v Moyse
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS,LORD JUSTICE ROMER,LORD JUSTICE PEARCE |
| Judgment Date | 09 March 1959 |
| Judgment citation (vLex) | [1959] EWCA Civ J0309-2 |
| Date | 09 March 1959 |
| Court | Court of Appeal |
[1959] EWCA Civ J0309-2
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins
Lord Justice Romer
Lord Justice Pearce
(H.M. Inspector of Taxes)
(The Appeal of the Appellant, Andrew Themson (H.M. Inspector of Taxes.)
Mr JOHN FOSTER, Q.C., and Mr ALAN ORR (instructed by The Solicitor of Inland Revenue, Somerset House, Strand, W.C.2) appeared on behalf of the Appellant.
Mr F.N. BUCHER, Q.C., and Mr P. BRENNAN (instructed by Messrs. Vandercom, Stanton & Co., 35, Spring Gardens, Trafalgar Square, S.W.L.) appeared for the Reapondent.
: This is an appeal by the Crown from a Judgment of Mr Justice Wynn-Parry dated the 22nd July, 1958, affirming a deterination of the Special Commissioners in favour of the Respondent, Mr Stephen Dickson Moyse, on his appeal against assessments to income tax made upon him under Cases IV and V of Schedule "D"!of the Income Tax Act, 1918 for the years 1949-50, 1950-51 and 1951-52.
The assessmente under Case IV were made in respect of income from securities in the United States of America and these under Case V were made in respect of income from possessions in the United States of America.
The Respondent was born an American citizen and remains domiciled in the United States of America theugh he has at all material times been a naturalised British subject and resident in the United Kingdom.
He was at all material times entitled to a life interest in a Trust in the United States of America under the Will of his father the late Leon Moyse and also to a life interest in the residuary estate of his mother the late Mrs. A.D. Sohmucker in the United States of America. The mother's estate was in course of administration from the 19th August, 1943, to the 18th April, 1951, and it is agreed that under the Finance Act, 1938, section 30, the income arising from this estate in the course of administration was for income tax purposes to be deemed to be income from securities out of the United Kingdom and as such assessable under Case IV of Schedule "D" to the limited extent prescribed by Rule 2 of the Rules applicable to that case. It is also agreed that the income arising from the Respondent's life interest under his father's Will and the income arising from his mother's estate after completion of the administration was income arising from possessions out of the United Kingdom and as such assessable under Case V of Schedule "D" but only to the limited extent prescribed by Rule 2 of the Rules applicable to that case.
I should next refer to the relevant provisions of the Rules applicable to Cases IV and V of Schedule "D". Rules applicable to Case IV: "1. The tax in respect of income arising from securities in any place out of the United Kingdom shall be computed on the full amount thereof arising in the year of assessment, whether the income has been or will be received in the United Kingdom or not". That, I think, is all I need read of Rule 1.
Then Rule 2: "The foregoing rule shall not apply - (a) to any person who satisfies the Commissioners of Inland Revenue that he is not domiciled in the United Kingdom, or that, being a British subject, he is not ordinarily resident in the United Kingdom". Then the last paragraph on Rule 2: "The tax in any such case shall be computed on the full amount, so far as the same can be computed, of the sums which have been, or will be, recieved in the United Kingdom in the year of assessment witheut any deduction or abatement."
Then the Rules applicable to Case V: "1 The tax in respect of income arising from possessions out of the United Kingdom" - with certain exceptions - shall be computed on the full amount thereof on an average of the three preceding years, as directed in Case I, whether the income "has been or will be received in the United Kingdom or not", and I think that is all I need read of that Rule.
Then Rule 2: "The tax in respect of income arising from possessions out of the United Kingdom, other than income to which rule 1 applies, shall be computed on the full amount of the actual sums annually received in the United Kingdom from remittances payable in the United Kingdom, from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of any such remittances, property, money, or value brought or to be brought into the United Kingdom, on an average of the three preceding years as directed in Case I, witheut any deduction or abatement other than is therein allowed."
Then 3: "Rule 1 of the foregoing rules shall not apply - (a) to a person who satisfies the Commissioners of Inland Revenue that he is not domioiled in the United Kingdom, or that, being a British subject, he is not ordinarily resident in the United Kingdom" - then the last line of the rule: "and in such cases the computation shall be made in accordance with rule 2."
The income from the Respondent's two life interests was during the period relevant to the present appeal paid in dollars by the Executors and Trustees into the Respondent's account at the Wall Street Branch of the Bank of New York. With one exception (to which I will later refer) nothing except the Respondent's income from the two life interests was paid into his New York Bank account.
Under Sections 1(1) and 2(1) of the Exohange Control Act, 1947, the Respondent was prohibited, save with Treasury permission which he did not have at any material time, from selling the dollars credited to his New York account to any person other than an autherised dealer as defined by Section 42 of the Act and also from retaining them, and was bound to offer them for sale to an autherised dealer.
In these circumstances the Respondent effected in London at first with Seligman Brothers Limited and later with Midland Bank Limited (both being English banks and autherised dealers under the Exchange Control Act, 1947) the transactions giving rise to the disputed assessments. These transactions are described in great detail in the Case Stated by the Special Commissioners who received oral evidence and considered a large number of documents, and I need not repeat the facts at length.
The essential features common to all the transactions in question appear to have been these:-
(i) The Respondent drew a cheque on his New York bank account for a specified sum in U.S. dollars in favour of the English bank (i.e. Seligman Brothers or the Midland Bank Limited.)
(ii) The Respondent delivered this cheque to the English bank with a request that they should purchase it for the sterling equivalent of its amount in dollars at the current rate of exchange.
(iii) The English bank acceded to this request, sold a like amount of dollars to the Bank of England or some other permitted purchaser and credited the Respondent's account with them in London with the sterling equivalent of the amount of the cheque in dollars at the rate of exchange ruling on the day following their confirmation of the purchase, which would normally be the date of their sale to the Bank of England, or on the permitted market, of the like amount of dollars.
(iv) The English bank sent the cheque by registered mail to their correspondents in New York with instructions (a) to have the cheque cleared on the Respondent's New York bank account, (b) to credit the English Bank's New York bank account with the resulting dollars, and (c) to pay out of the last-mentioned bank account the amount of dollars which had boen sold to the Bank of England to the Federal Reserve Bank in New York for the creait of the account of the Bank of England.
The Special Commissioners' findings, to a great extent findings of fact, in regard to the character and effect of these transactions are summarised in paragraph 7 of the Case Stated from which I quote the following: "We, the Commissioners who heard the appeal, gave our decision in the following terms. The question we had to answer was whether on the facts of the present case - and we had heard evidence not only from the Respondent but also from eminent bankers - the Respondent was liable to tax under Case IV and Case V of Schedule D in respect of income from foreign securities and foreign possessions. The Respondent had a bank account in New York and into that bank account there was credited the the whole of his American income. The Respondent gave no instructions to the New York bank to remit sums of money to him in the United Kingdom. From time to time the Respondent drew cheques in dollars on his New York bank account in favour of Seligman Bros, or Kidland Bank, Ltd., which he asked these banks to purchase from him. At the time of each such request the Respondent instructed the purchasing bank to place the proceeds in sterling to the credit of his United Kingdom account. The Respondent's requests and instructions were in every case duly complied with. It seems clear to us that neither Seligman Bros, nor the Midland Bank, Ltd., were acting as a collecting agent on the Respondent's behalf but in every case acted as a principal, and we so found.
"Evidence had also been given of the transactions which took place between the purchasing banks and the Bank of England and the correspondents in the United States. Having regard to that evidence (which we accepted) and the arguments that had been addressed to us, we held that no remittances of American income had been brought into the United Kingdom. Furthermore, on the reasoning employed by Lord Cohen in the case of Commissioners of Inland Revenue v. Gordon we did not accept the view that there had boen a constructive remittance."
As to the sums sought to be assessed under Case IV of Schedule "D" as income received in this country from the mother's ostate, the Respondent's...
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