USHER'S WILTSHIRE BREWERY, Ltd v BRUCE (Surveyor of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 04 December 1914 |
| Date | 04 December 1914 |
| Court | King's Bench Division |
NO. 354.-IN THE HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
COURT OF APPEAL.-
HOUSE OF LORDS.-
Income Tax (Schedule D). - Deductions - Brewer - Tied Houses.
A Brewery Company are the owners or lessees of a number of licensed premises which they have acquired solely in the course of and for the purpose of their business as brewers and as a necessary incident to the more profitably carrying on of their said business. The licensed premises are let to tenants who are "tied" to purchase their beers, &c., from the Company. The Company claimed that in the computation of their profits for assessment under Schedule D, the following expenses incurred in connection with these tied houses should be allowed:-
(A) repairs to tied houses; (B) differences between rents of leasehold houses or Schedule A assessment of freehold houses on the one hand and the rents received from the tied tenants on the other hand; (C) fire and licence insurance premiums; (D) rates and taxes; (F) legal and other costs.
Held, that all the expenses claimed were admissible as being money wholly and exclusively laid out or expended for the purpose of the trade of the Brewery Company.
Case stated under 43 & 44 Vic. Cap. 19, Sec. 59, for the opinion of The King's Bench Division of the High Court.
1. At a meeting of the Commissioners for General Purposes of the Income Tax Acts for the Tax Division of Trowbridge in the County of Wilts held on the 31st day of May 1912 for the
purpose of hearing and disposing of Appeals under the Income Tax Acts for the year ending the 5th day of April 1912, Usher's Wiltshire Brewery Limited, a Company registered under the Companies Acts, carrying on business as brewers and maltsters and sellers of beer, wine and spirits at Trowbridge aforesaid and elsewhere appealed against an assessment of £17,383 (less £401 allowance for wear and tear of plant) made on them under 16 and 17 Vic. Cap. 34 Sec. 2 Sch. D in respect of the profits of their trade. The Appellants claimed to have this Assessment reduced by the following amounts:-£ |
s. |
d. |
||
(A) |
Repairs to tied houses |
1004 |
0 |
10 |
(B) |
Difference between rents of leasehold houses or Sch. A. Assessment of freehold houses on the one hand, and rents received from tied tenants on the other hand |
2134 |
14 |
6 |
(C) |
Fire and licence insurance premiums |
90 |
7 |
6 |
(D) |
Rates and taxes |
38 |
7 |
6 |
(E) |
Gas and water |
4 |
2 |
6 |
(F) |
Legal and other costs |
66 |
2 |
8 |
2. The Appellants were represented by their Secretary, Edgar Lofts.
3. In common with other Brewery Companies the Appellants have from time to time in order to increase their trade purchased licensed houses which they let to tenants, one of the terms of such lettings being that the tenants should buy from the Appellants all the ale, beer, wines and spirits sold in such tied houses.
4. The profits of the Appellants are made by brewing ale, beer and other articles and purchasing spirits in bulk and selling these commodities partly to private individuals, partly (to a limited degree) to free licensed houses, and as to the greater part to the tenants of their tied houses. All these profits of the Appellants are included in the Assessment. Such profits are materially increased owing to the possession by them of the tied houses in question and in consequence of an increased sale of these commodities to the tenants of those tied houses and to the fact that they are able to obtain and do obtain for the same class of goods a higher price from the tenants of their tied houses than they can obtain or are able to obtain from their other customers.
5. The tenants of the Appellants' tied houses do not, as a matter of fact, spend any money on repairs to the tied houses let to them. Such repairs as from time to time become necessary to these tied houses are executed by the Appellants and it is not disputed that the sum of £1,004 0s. 10d. is not an excessive sum to be expended in such repairs, including compliance with the requirements of the Licensing Authorities.
6. The tied houses in question are occupied by the tenants partly for the purposes of their trade as licensed victuallers and beer retailers, and partly as the private dwellings of themselves and their families. Repairs are executed indifferently to the trade and private dwelling parts of these houses.
7. The said premises have been acquired by the Appellants and are held by them solely in the course of and for the purpose of their said business and as a necessary incident to the more profitably carrying on of their said business. The possession and employment of the said premises as aforesaid are necessary to enable them to earn the profits upon which they pay income tax, and without the said premises and their use as aforesaid, the Appellants' profits if there were any at all would be less in amount.
Except for the purposes of and employment in their said business, the Appellants would not possess the said premises.
The said premises were not acquired and are not held by the Appellants as investments and if any house loses its licence the Appellants as soon as possible get rid of it.
8. The repairs to the said premises (in respect of which a deduction was claimed by the Appellants) were solely repairs which the Appellants were bound to do in order to maintain the said premises in a condition fit to use as licensed premises.
9. In addition to their tied houses, the Appellants own other licensed houses which they have during the year occupied by their managers or servants, and in respect of these, and of the brewery and other premises occupied by the Appellants for the purpose of their trade, they have been allowed for repairs before the Assessment was made the allowance to which they are entitled under 5 and 6 Vic. Cap. 35, Sec. 100, First Class, Rule 3.
10. It was contended on behalf of the Appellants:-
(a) That having regard to the decision in Smith v. Lion Brewery Company (1911) A.C. 150(1) the deductions claimed ought to be allowed.
(b) That the licensed premises of which they are the owners and lessees have been acquired by them and were held by them in the course of and for the purpose of their said business and as a necessary incident to the more profitably carrying on of such business and that the purchase and letting of licensed houses was an essential part of their business as brewers.
(c) That in consideration of the tenants of their tied houses covenanting to buy all ales, beer, wines and spirits from the Appellants only, those tenants pay a much less rent than the full annual value of the premises.
(d) That by these means and the possession and use of the said premises which are employed by the Appellants as substantially necessary to carry on their business profitably the Appellants are enabled to earn and do earn profits upon which they pay income tax and which without the said premises and their user for the purposes aforesaid would be less in amount. That the Appellants had not acquired the premises as investments or for the purposes of investment.
-
(e) That the repairs in question were a necessary outlay without which such profits could not have been earned and that these form a legitimate deduction in arriving at the total gains in respect of which they are assessed under Schedule D.
(f) That they are properly entitled to a deduction from their profits by their assessment under Schedule D in respect of the difference between the rents of leasehold houses or Schedule A Assessment of freehold houses on the one hand and rents received from their tenants of tied houses on the other hand.
(g) That they are entitled to the above named deductions for fire and licence insurance premiums, for rates and taxes, for gas and water and for legal and other costs as necessary expenses in the conduct of their business, without which their profits as assessed under Schedule D could not be earned.
11. The Surveyor of Taxes on the other hand contended:-
(a) That the trade of the brewery is quite distinct from the trade of the public house and that the expenses incurred in respect to the public house cannot be deducted from the profits of the brewery and that so far as the deduction for repairs was concerned, the Commissioners were bound by the judicial decision contained in the case of Brickwood & Co. v. Reynolds (Surveyor of Taxes) decided in the Court of Appeal on the 17th day of November 1897.(1)
(b) That there was no authority for the deductions (B), (C), (D), (E), and (F) claimed by the Appellants as set forth above, on the ground that the decision as to repairs to tied houses covers these deductions by analogy.
(c) That in estimating the balance of the profits and gains these sums should not be set against or deducted from such profits and gains, being money wholly and exclusively laid out or expended for the purpose of such trade and that with regard to the deductions sought under these heads also, it is necessary to differentiate between the trade of the brewery and the trade of the public house, and finally that these deductions are not authorised by the Third Rule of the First Case, Sec. 100, Income Tax Act, 1842.
12. At the conclusion of the arguments we announced our determination that in our opinion upon the authorities stated the Appellants were not entitled to the deductions claimed.
13. The Appellants expressed their dissatisfaction with our determination as being erroneous in point of law, and required us to state and sign a case for the High Court of Justice which we have stated and do now sign accordingly.
The question for the Opinion of the Court is whether the Commissioners were right.
Given under our hands this 6th day of February, 1913.
ERLYSMAN PINCKNEY (Chairman),
WILLIAM MACKAY,
FRED. R. WILLIS,
J. POYNTON HADEN,
E.C. PINCKNEY,
W.H. CAVERTON
Commissioners for General Purposes,
Trowbridge Division,
County of Wilts.
To continue reading
Request your trial
-
Cronin (Inspector of Taxes) v Cork and County Property Company Ltd
...[1961] 2 All E.R. 167; (1961) 39 T.C. 537. Usher's Wiltshire Brewery Ltd. v. Bruce [1915] A.C. 433; (1914) 112 L.T. 651; 31 T.L.R. 104; 6 T.C. 399. Revenue - Corporation tax - Profits or gains - Trade of dealing in or developing land - Leasehold interest acquired without payment of fine - I......
-
Kealy v O'Mara, Limerick, Ltd
...v The Lion Brewery Co Ltd 5 TC 568, [1911] AC 150. Union Cold Storage 129 LT 512, 8 TC 725 p 736. Usher’s Wiltshire Brewery Ltd v Bruce 6 TC 399, [1915] AC Vallambrosa Rubber Co Ltd v Farmer 5 TC 529, [1910] SC 519. Van den Bergs Ltd v Clark 19 TC 390, [1935] AC 431. Cases also cited Englis......
-
Interfish Ltd v HMRC
...influenced by the taxpayer's conscious motives but it is not bound by them. 20. Mr Peacock cited Usher’s Wiltshire Brewery v Bruce (1914) 6 TC 399 per Lord Sumner at 437 to illustrate the point that the fact that there is a benefit to a third party does not, of itself, mean that a payment i......
-
Interfish Ltd v The Commissioners for HM Revenue and Customs
...influenced by the taxpayer's conscious motives but it is not bound by them. 20. Mr Peacock cited Usher’s Wiltshire Brewery v Bruce (1914) 6 TC 399 per Lord Sumner at 437 to illustrate the point that the fact that there is a benefit to a third party does not, of itself, mean that a payment i......