Wicks v Firth
| Jurisdiction | UK Non-devolved |
| Judge | Lord Fraser of Tullybelton,Lord Scarman,Lord Bridge of Harwich,Lord Brandon of Oakbrook,Lord Templeman,and |
| Judgment Date | 16 December 1982 |
| Judgment citation (vLex) | [1982] UKHL J1216-2 |
| Date | 16 December 1982 |
| Court | House of Lords |
[1982] UKHL J1216-2
House of Lords
Lord Fraser of Tullybelton
Lord Scarman
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Templeman
My Lords,
The facts out of which these appeals arise are explained in the speech about to be delivered by my noble and learned friend, Lord Templeman, and I need not repeat them. The appeals raise two questions of law. The first is whether the benefits, consisting of awards to Martin Wicks and Christine Johnson, were provided "at the cost of" Imperial Chemical Industries Ltd. in the sense of section 61(3) of the Finance Act 1976. ICI were the employers of the fathers of Martin and Christine. For the reasons explained by Lord Templeman I agree with him that the answer to that question is in the affirmative. It follows that, by reason of section 72(3) of the 1976 Act, the benefit in each case is deemed to have been made by reason of the father's employment, and therefore that the cash equivalent, or cost of providing the benefit, is to be treated as an emolument of the father's employment and chargeable to income tax under Schedule E (section 61(1)).
Like Lord Templeman I decline to be drawn into consideration of what is, in the circumstances of these appeals, the hypothetical question whether the benefit was provided by reason of the employment apart from the deeming provisions of section 72(3).
The second question is whether the emoluments are exempt, on the ground that they are income "arising from a scholarship" within the meaning of section 375(1) of the Income and Corporation Taxes Act 1970. I would answer that question also in the affirmative. I entirely agree with the reasons given by my noble and learned friend Lord Bridge of Harwich for arriving at that result. I wish only to make a brief addition to the reasons which he has so well expressed. In the first place it seems to me that the contrary view depends on what I regard, with the utmost respect, as an unduly literal reading of section 61(1) of the 1976 Act and section 375(1) of the 1970 Act, which fails to give effect to the clear intention of Parliament expressed in section 375(1) that scholarship income should be exempt from income tax. In the second place, even reading the two sections literally, I do not think it is correct to describe the notional income created by section 61(1) as income "arising from" an emolument. It is to be treated as an emolument of the employee, in this case the father of the scholar, and, like all emoluments it necessarily is income—see Income and Corporation Taxes Act 1970 section 183(1). But I think that it arises from the scholarship awarded to the taxpayer's child.
For these reasons I would allow the appeal and restore the order of Goulding J.
My Lords,
I have had the advantage of reading in draft the speeches delivered by my noble and learned friends, Lord Fraser of Tullybelton and Lord Bridge of Harwich. I agree with them. For the reasons which they give I would allow the appeals.
My Lords,
I gratefully adopt the statement of the facts giving rise to these appeals in the speech to be delivered by my noble and learned friend Lord Templeman. I also agree with him that, for the reasons he gives, the awards made to Martin Wicks and Christine Johnson from the Imperial Chemical Industries Educational Trust were benefits provided at the cost of the appellant taxpayers' employers, within the meaning of section 61(3) of the Finance Act 1976. It follows that, in each case, by the application of section 72(3), the benefit was deemed to be provided by reason of the relevant taxpayer's employment and, therefore, by section 61(1), in the case of each taxpayer, an amount equal to the cash equivalent of the benefit was to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E.
The only difficult question raised by the appeals is that on which the judges who have already considered the case have been equally divided in opinion, viz. whether section 375(1) of the Income and Corporation Taxes Act 1970 is capable of providing an exemption from the liability which section 61 of the Act of 1976 creates. Section 375(1) provides:
"Income arising from a scholarship held by a person receiving full-time instruction at a university, college, school or other educational establishment shall be exempt from income tax, and no account shall be taken of any such income in computing the amount of income for income tax purposes."
It is common ground that the awards to Martin and Christine were "scholarships" within the meaning of this provision. The argument for the taxpayers in favour of the exemption to which they claim to be entitled is, as Oliver L.J. pointed out in the Court of Appeal, an engagingly simple one. The effect of section 61 of the Act of 1976 is to attribute to the taxpayer a certain sum of money which is to be treated as part of his income for tax purposes. The fact that it is notional income of the taxpayer arising from a statutory fiction does not prevent it from being "income" within the meaning of section 375. If one then asks what gives rise to this income, the answer must be the scholarship awarded to the taxpayer's child, for this is the benefit the provision of which brings into operation the machinery of section 61 of the Act of 1976. That which is treated as income under section 61 is accordingly income arising from a scholarship under section 375.
For myself I find the argument not only engagingly simple but also compelling. If there is a fallacy in it, I have been unable to detect it. I cannot see that the argument involves any straining of language beyond its natural meaning, and I should require to be persuaded that there were cogent reasons for denying the taxpayer an exemption to which, on the face of it, he appears to be entitled.
The Commissioners' reason for deciding this point in favour of the Revenue was thus expressed:
"The charge under section 61 is on the cash equivalent of the benefit provided not on the benefit itself. The cash equivalent is not of itself income but is to be treated as an emolument. A notional sum so treated is not, in our judgment, covered by the words income arising from a scholarship."
With respect, I cannot follow this reasoning. That which a statute deems to be income, whatever the precise language used to achieve that effect, can and should, in my opinion, be treated as income for all purposes. If it is income prima facie liable to bear tax, it is equally income prima facie eligible to qualify for any relevant exemption.
It appears that the primary consideration which weighed with Oliver L.J. and the sole consideration which weighed with Watkins L.J. on this point was that section 375 of the Act of 1970 re-enacted without change section 28 of the Finance Act 1920, which was said to have been intended only to exempt from taxation scholarship income in the hands of the scholarship holder. I am content to assume that the original intent of the provision was so limited. The argument founded on this consideration, however, seems to me, with respect, to beg the question arising from the need to construe section 375 in the new statutory context created by the Finance Act 1976. The legislature, enacting the latter statute, had no need to provide an express exemption of scholarships from the fringe benefits to be taxed under Chapter II of the Act of 1976, if the language of section 375 of the Act of 1970, in its ordinary meaning, was already apt to provide such an exemption. The earlier limitation on the scope of section 375 is irrelevant to its operation and effect when read in conjunction with the charging provision of section 61 of the Act of 1976.
Oliver L.J., at [1982] 2 W.L.R. 216 D-H, also presents a more sophisticated version of the view expressed by the Commissioners, on which I have already commented, and which I again find unconvincing. He further emphasises the wide definition of the "benefits" to which section 61 applies and the limited range of exceptions. The language of section 61, however, cannot have intended that the sums required to be "treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E" should be ineligible for any appropriate reliefs and exemptions made available by provisions to be found elsewhere in the general corpus of taxing legislation. For the reasons I have indicated, I think section 375 of the Act of 1970 affords such an appropriate exemption.
I note that in a Press Release issued by the Inland Revenue in June 1978, of which the relevant extract is quoted in the case stated, the Revenue, when announcing their intention to exact tax in cases such as those under appeal, indicated that they would still treat as exempt scholarships awarded, from a fund open to all, to scholars who happened to be the children of employees of the firm by which the fund was financed. Yet, if the construction of the relevant provisions for which the Revenue contend is right, liability would arise equally in such cases. This is not a decisive consideration, but in choosing between competing constructions of a taxing provision it is legitimate, I think, to incline against a construction which the Revenue are unwilling to apply in its full rigour, but feel they must mitigate by way of extra-statutory concession, recognising, presumably, that in some cases their construction would operate to produce a result which Parliament can hardly have intended.
Although I have expressed my reasons at some length, the point at issue is essentially a very short one. But for the conflict of judicial opinion in the...
To continue reading
Request your trial
-
Allan v Commissioners of Inland Revenue
...ELR[1940] AC 549.Salomon v A Salomon & Co Ltd ELR[1897] AC 22.Shilton v Wilmshurst (HMIT) TAX[1991] BTC 66.Wicks v Firth (HMIT) TAX[1982] BTC 402. 9. The commissioners who heard the appeal made avizandum and thereafter gave their decision in writing as (a) that the R W Forsyth Ltd redundanc......
-
Appeal Under Section 13 Of The Tribunals, Courts And Enforcement Act 2007 By Vermilion Holdings Ltd Against The Commissioners For Her Majesty's Revenue And Customs
...meaning of the phrase “by reason of an employment” in sub-section 471(3) under reference to Wicks v 8 Firth [1982] 1 Ch 355 (at 363; see [1983] 2 AC 214). The judge held (at para 105) “As a matter of fact” that Mr Noble’s appointment as a director “was not the causa for the grant of the 200......
-
Norman
...benefits in kind introduced in 1948) where it first appeared in FA 1976. It was held by the Court of Appeal in Wicks v Firth (HMIT) TAX(1982) 56 TC 318 that the term “by reason of” in the benefits code is wider than that used for emoluments generally where it was necessary to show that they......
-
Dunlop International AG v Pardoe (Inspector of Taxes)
...cases were referred to in the judgment: NAP Holdings UK Ltd v Whittles (HMIT) TAXTAX[1992] BTC 37; 67 TC 166 Wicks v Firth (HMIT) TAXTAX[1982] BTC 402; 56 TC 318 Corporation tax - Chargeable gains - Principal company ceased to be member of group on becoming non-resident in the UK - Company ......
-
Chapter EIM21006
...(EIM20007)), receives by reason of the employment and which is not chargeable to income tax under some other provision. Wicks v Firth (56TC318) For example, in Wicks v Firth payments made as scholarships to the children of an employee within the benefits code were held to be benefits within......
-
Chapter EIM21220
...benefit to the director or employee so long as they are, ultimately, the source of the funds used to pay for the benefit, see Wicks v Firth (56TC 318). In most cases it will be the employer who is paying for, and therefore providing, the benefit. If the benefit is provided by the employer, ......