Owen v Pook (Inspector of Taxes)
[1969] 2 All ER 1(Judgment by: Lord Donovan)
Owen
v Pook (Inspector of Taxes)
Judges:
Lord Guest
Lord Pearce
Lord DonovanLord Wilberforce
Lord Pearson
Subject References:
Income Tax
Income
Emoluments
Perquisites or profits of office or employment
Travelling expenses
Medical practitioner practising at residence and also holding part-time appointments at hospital 15 miles away as obstetrician and anaesthetist
Emergency cases
Payment of allowance for travel by car to hospital
Payment irrespective of the method of travel
Whether emoluments of office
Deduction in computing profits
Expenses
Medical practitioner
General medical practitioner practising at his residence and also holding part-time appointments at hospital 15 miles away
Hospital work as obstetrician and anaesthetist
Emergency cases
Expenses of travel by car to and from hospital
Whether expenses deductible
Legislative References:
Finance Act 1956 (4 & 5 Eliz 2 c 54) - Sch 2, para 1(1)
Income Tax Act 1952 (15 & 16 Geo 6 & 1 Eliz 2 c 10) - s 156, Sch E, Case 1, as substituted by Finance Act 1956 (4 & 5 Eliz 2 c 54), s 10(1), and Sch 9, r 7 to the Act of 1952
Case References:
Fergusson (Surveyor of Taxes) v Noble - [1919] SC 534; 7 Tax Cas 176; 28 Digest (Repl) 237, *565
Hochstrasser (Inspector of Taxes) v Mayes - [1958] 1 All ER 369; [1959] Ch 22; [1958] 2 WLR 982, affd CA; [1958] 3 All ER 285; [1959] Ch 22; [1958] 3 WLR 215, affd HL; [1959] 3 All ER 817; [1960] AC 376; [1960] 2 WLR 63; 38 Tax Cas 673; Digest (Cont Vol A) 888, 987
Newsom v Robertson - [1952] 2 All ER 728; [1953] Ch 7; 33 Tax Cas 452; 28 Digest (Repl) 158, 618
Nolder v Walters - (1930), 15 Tax Cas 380; 28 Digest (Repl) 244, 1074
R v Postmaster General - (1878), 3 QBD 428; 47 LJQB 435; 38 LT 89; 38 Digest (Repl) 78, 539
Ricketts v Colquhoun (Inspector of Taxes) - [1924] 2 KB 347, affd CA; [1925] 1 KB 725, affd HL; [1926] AC 1; 95 LJKB 82; 134 LT 106; 90 JP 9; 10 Tax Cas 118; 28 Digest (Repl) 242, 1059
Judgment date: 26 March 1969
Judgment by:
Lord Donovan
My Lords, two questions arise in this case. First, are the travelling expenses re-imbursed to the taxpayer by his employers' "emoluments" from his office or employment within the meaning of Sch E? Secondly, if they are, do such travelling expenses qualify as admissible deductions under r 7 of that schedule?
The Court of Appeal ([1968] 1 All ER 261 at p 264; [1968] 2 WLR 591 at p 594) answered the first question in the affirmative, Lord Denning MR saying that the mileage allowance for travel was paid to the taxpayer no matter how he made his way to the hospital at Haverfordwest: and he thought the point was covered by Fergusson (Surveyor of Taxes) v Noble . He considered that the case might be otherwise if the taxpayer was simply re-imbursed what he had actually spent. Diplock LJ agreed ([1968] 1 All ER at p 265; [1968] 2 WLR at p 596) with what Lord Denning MR had said on this point, but Edmund Davies LJ thought ([1968] 1 All ER at p 267; [1968] 2 WLR at p 598) that the travelling expenses paid would still be "emoluments" even though they represented recoupment of actual outgoings.
The facts regarding the taxpayer's entitlement to travelling expenses were not fully investigated before the general commissioners, the argument before them being confined to the second question under r 7. The commissioners simply found that in the first of the two years under appeal, namely, 1962-63, the tax-payer made about 140 journeys to the hospital and received travelling expenses for the journey there, and back to Fishguard, of £100. For the second of the two years, namely, 1963-64 he likewise received £82 in respect of 115 such journeys: it is only in the taxpayer's contentions that it is alleged that the actual cost of these journeys was £150 for 1962-63 and £123 for 1963-64.
Since, however, the Case Stated finds that under the terms and conditions of service of persons like the taxpayer travelling expenses are paid at a fixed rate per mile, that they are not payable for a single journey in excess of ten miles, and that the taxpayer bears the cost himself of the additional five miles between Fishguard and Haverfordwest, it may fairly be assumed that there was no profit element in the travelling allowances he received in these two years, but that, on the contrary they left him out of pocket. Before your Lordships the case proceeded on that footing without demur from the Crown and on that basis I proceed to consider the first question.
Tax under Sch E is charged "on the full amount of the emoluments" from the office or employment: and "emoluments" are defined as including "all salaries, fees, wages, perquisites, and profits whatsoever". (The Income Tax Act 1952, s 156, as amended by the Finance Act 1956, s 10.) [Fa]
This definition certainly gives no impetus towards the view that it covers sums paid to an employee simply in re-imbursement of expenses incurred in carrying out his duties. Nor do the dictionary definitions of the word, namely, "profit or gain, advantage, due, reward, remuneration, salary". (Murray's English Dictionary: The Shorter Oxford Dictionary.) Nor does s 1 of the Act of 1952 which contemplates that income tax will be imposed on "profits or gains".
It is also interesting to notice the decision of the Court of Appeal in R v Postmaster General . There an ex-employee of a private concern whose business had been taken over by the Postmaster General was entitled to receive from him compensation based on his past emoluments from the private employer. He used to receive from him travelling and subsistence allowances which yielded him a small profit. It was held that this profit was part of the ex-employee's emoluments. No one suggested that the allowances were, as a whole, part of the claimant's "emoluments".
On the footing that the travelling expenses paid to the taxpayer simply reimbursed what he had spent (or part of what he had spent) on travelling in performance of his duties, I do not think they should be regarded as emoluments of his employment within the meaning of Sch E. I think the case is distinguishable from Fergusson v Noble where a cash allowance was paid to the employee which, although he may have been required to spend it on buying a civilian suit, yielded a benefit or advantage to him.
This does not dispose of the appeal, for the taxpayer claims the excess of such expenditure over what he received in re-imbursement as an allowable deduction from his salary. In this connection it is not enough to say that such excess moneys were spent in the performance of his duties. Rule 7 of Sch E requires that they should be "necessarily" incurred and defrayed; and the decision of this House in Ricketts v Colquhoun (Inspector of Taxes) has laid down that the word "necessarily" imports an objective and not a subjective test. The expenses must be such as any holder of the employment would be bound to incur. It is not enough that they are incurred simply because the employee happens or chooses to live some distance from his work.
Here it is contended for the taxpayer that he really has two places of employment, one his home at Fishguard and the other the hospital at Haverfordwest; and that the expenses of travelling between the two are deductible accordingly. If the premises are sound the Crown would concede the conclusion. The contention of two places of employment is rested on these considerations. First, it is found by the general commissioners that the taxpayer is on stand-by duty at certain specific times, and at these times must be accessible by telephone. Secondly, that his responsibility for a patient begins as soon as he receives a telephone call, and that on receipt of such a call he gives any necessary preliminary instructions to the hospital staff in relation to the case (which are all emergency cases).
I do not think these facts establish the contention of two places of employment at all. In a very real sense almost every general medical practitioner is on stand-by duty for emergency cases, and is in fact available on the telephone. And almost every such practitioner will, if necessary, give preliminary instructions concerning the patient to anyone who summons him by telephone. There are also thousands of employees in other walks of life who have to be on stand-by duty at their homes and are required to obey a summons to go to their factory or their offices to cope with some emergency. If this is to mean that they all have two places of employment I see no reason why all of them should not be entitled to claim travelling expenses between their homes and their places of work.
The simple truth, as I see it, is that the taxpayer has one place of employment as an obstetrician and anaesthetist; and that is the hospital at Haverfordwest. When he answers the telephone and gives the necessary preliminary instructions, of course he is performing the duties of his office. But when he then gets into his car and drives the 15 miles to Haverfordwest he is not performing such duties at all. He incurs the expense of so travelling because he chooses to live at Fishguard. I think the case is clearly within the decision in Ricketts v Colquhoun as Stamp J, and the majority of the Court of Appeal decided. I would therefore allow the appeal so far as the assessment treats the re-imbursement of travelling expenses as an "emolument", but dismiss it as regards the claim to deduct any excess expenditure under r 7.