Owen v Pook (Inspector of Taxes)
[1969] 2 All ER 1(Judgment by: Lord Guest)
Owen
v Pook (Inspector of Taxes)
Judges:
Lord GuestLord Pearce
Lord Donovan
Lord 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 Guest
My Lords, Dr Owen, the taxpayer, is a general medical practitioner in practice at Fishguard. He also holds two part-time appointments with the South Wales Hospital Management Committee as obstetrician and anaesthetist at a hospital in Haverfordwest some 15 miles from Fishguard. Under the terms and conditions of these appointments he was on "stand-by duty" as obstetrician, one weekend a month and as anaesthetist on Monday and Friday nights and one weekend a month. At such times he was required to be accessible by telephone, apart from being on call at all times for obstetric "flying squad" duties in any part of Pembrokeshire. He had no other duties at the hospital, all were concerned with emergency cases. The flying squad duties were very rare. On receipt of a telephone call from the hospital he gives instructions to the hospital staff. He usually sets out immediately by car to the hospital. He may advise treatment by telephone and await a further report. Sometimes the telephone call is received when he is out on his medical rounds. It is found in the Case Stated that his responsibility for a patient begins as soon as he receives a telephone call.
Under the terms and conditions of service of hospital staff the management committee pay to the taxpayer travelling expenses as a part-time officer at a fixed rate per mile, said to be 8d, for single journeys between Fishguard and the hospital, limited to a single journey of ten miles. The taxpayer pays the cost of the additional five miles travel himself.
The taxpayer in 1962-63 made about 140 journeys to the hospital and received payment of expenses amounting to £100. This sum was included in his income assessable for that year. In 1963-64 he made about 115 journeys receiving £82 which was also included in his assessment for 1963-64. Before the commissioners he sought to deduct the whole cost of travelling incurred, which for 1962-63 amounted to £150 and for 1963-64 to £123, for income tax purposes.
The General Commissioners sustained his appeal and allowed the deductions sought under r 7 of Sch 9 to the Income Tax Act 1952. Stamp J reversed that determination and his judgment was upheld by the Court of Appeal (Diplock and Edmund Davies LJJ Lord Denning MR dissenting).
Two questions arise:
- (i)
- whether the travelling allowances were properly included in the taxpayer's emoluments for income tax purposes under Sch E, and
- (ii)
- was the actual cost of the journeys deductible from his emoluments under the relevant rule?
Schedule E to the Income Tax Act 1952 provides as follows:
"Tax under this Schedule shall be charged in respect of any office or employment or emoluments therefrom which fall under [Cases I, II and III]."
Paragraph 1(1) of Sch 2 to the Finance Act 1956 provides inter alia:
"Tax under Case I, II or III shall, except as hereinafter mentioned, be chargeable on the full amount of the emoluments falling under that Case, subject to such deductions only as may be authorised by the Income Tax Acts, and the expression 'emoluments' shall include all salaries, fees, wages, perquisites and profits whatsoever."
Under Sch 9 to the Income Tax Act 1952, r 7 applicable to Sch E, provides as follows:
"If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed."
The first point, whether the travelling expenses paid to the taxpayer were properly included as part of his emoluments was not taken before the general commissioners or before Stamp J. It was, however, raised without objection before the Court of Appeal who decided it adversely to the taxpayer. No objection was taken to the argument being raised before your Lordships.
In view of the way in which the case went before the commissioners-the only point being whether the actual travelling expenses were properly deductible-there is little material in the case on the point. The taxpayer's entitlement to these expenses is contained in condition 19 "Expenses" of the terms and conditions of service of hospital medical and dental staffs (England and Wales):
- "(iv)
- A part-time officer, when called out in an emergency to the hospital where his principal duties lie, shall receive expenses for such journeys."
The limitation to ten miles for a single journey is contained in condition 19 (b) (3) (iii) and under the heading:
"Travelling Expenses, Mileage Allowances, etc:...
- "(iii)
- Where a part-time officer travels between his private consulting room or place of residence (whichever is the nearer) and the hospital where his principal duties lie before and/or after an official journey, expenses shall be payable for the whole distance provided that for journeys to and from the hospital where the officer's principal duties lie no expenses shall be paid for any distance exceeding ten miles each way unless circumstances warrant exceptional treatment."
The Court of Appeal, certainly Lord Denning MR appear to have treated the payments as allowances payable to the taxpayer whether he incurred the expenses or not. But Edmund Davies LJ would have decided the case the same way whether the payments were actual re-imbursement for expenses incurred or allowances. From their reliance on Fergusson (Surveyor of Taxes) v Noble I take it that the case was treated as one where the payment was truly an allowance and not a re-imbursement.
There is, in my view, a distinction between the two cases. If the allowance was, as in Fergusson (Surveyor of Taxes) v Noble , a clothing allowance payable whether it was expended or not, I can see the argument that it was an emolument in the sense of a profit or gain and I do not wish to question the authority of that case; but if the payment was merely a re-imbursement for actual expenditure, different considerations arise. This case is, in my view, distinguishable.
Counsel for the Crown was prepared to take the case on the footing that it was a re-imbursement for actual expenditure, and I so treat it. The Crown's contention, therefore, must be that where an officer assessed under Sch E receives an allowance for travelling which is, under his conditions of service, pro tanto to re-imburse him for the expense occasioned to him on travelling, this allowance is an emolument. The fact that "emolument" as defined includes "perquisites and profits" does not, in my view, advance the Crown's argument. "Perquisite" is merely a casual emolument additional to regular salary or wages. But the allowance must, to be chargeable, accrue "in respect of any office or employment" (Sch E). In Hochstrasser (Inspector of Taxes) v Mayes ([1959] 3 All ER 817 at p 821; 38 Tax Cas 673 at p 705) Viscount Simonds quotes with approval a passage from the judgment of Upjohn J ([1958] 1 All ER 369 at p 374; 38 Tax Cas at p 685), to the following effect:
"In my judgment [he said] the authorities show this, that it is a question to be answered in the light of the particular facts of every case whether or not a particular payment is or is not a profit arising from the employment. Disregarding entirely contracts for full consideration in money or money's worth and personal presents, in my judgment not every payment made to an employee is necessarily made to him as a profit arising from his employment. Indeed, in my judgment, the authorities show that, to be a profit arising from the employment, the payment must be made in reference to the service the employee renders by virtue of his office, and it must be something in the nature of a reward for services past, present or future."
Lord Radcliffe, who concurred with Viscount Simonds, said ([1959] 3 All ER at p 823; 38 Tax Cas at p 707):
"... while it is not sufficient to render a payment assessable that an employee would not have received it unless he had been an employee, it is assessable if it has been paid to him in return for acting as or being an employee ... The money was not paid to him as wages."
Later in his judgment Lord Radcliffe appears to treat a claim for indemnity as not assessable. The facts in that case were widely different from the present, but if the proper test is whether the sum is a reward for services, then, in my view, the travelling allowances paid to the taxpayer are not emoluments. To say that the taxpayer is to that extent "better off" is not to the point. The allowances were used to fill a hole in his emoluments by his expenditure on travel. The allowances were made for the convenience of the taxpayer to allow him to do his work at the hospital from a suitably adjacent area. In my view, the travelling allowances were not emoluments.
If I am right that the allowances are not emoluments no question arises as to deductibility of the actual sums expended on the 20-mile journey. There still remains, however, the question as to the extra expense for which the taxpayer was not indemnified but had to pay himself. The basis of the Crown's argument on this aspect of the case is Ricketts v Colquhoun (Inspector of Taxes) . The quotation from Lord Blanesburgh's speech referring to r 7 (as it then was) is ((1925), 10 Tax Cas at p 135; [1926] AC at pp 7, 8):
"But I am also struck by this, that, as it seems to me, although undoubtedly less obtrusively, the language of the Rule points to the expenses with which it is concerned as being confined to those which each and every occupant of the particular office is necessarily obliged to incur in the performance of its duties, to expenses imposed upon each holder ex necessitate of his office and to such expenses only. It says:-'If the holder of an office'-the words, be it observed, are not 'if any holder of an office'-'is obliged to incur expenses in the performance of the duties of the office'-the duties again are not the duties of his office; in other words, the terms employed are strictly, and, I cannot doubt, purposely, not personal but objective. The deductible expenses do not extend to those which the holder has to incur mainly and, it may be, only because of circumstances in relation to his office which are personal to himself or are the result of his own volition."
The recorder of Portsmouth was not allowed to deduct the expenses of travelling between London and Portsmouth. Counsel for the taxpayer did not ask your
Lordships to say that Ricketts v Colquhoun was wrongly decided but he sought to distinguish it on the facts of this case. I consider that he has sufficiently distinguished it.
In Ricketts v Colquhoun there was only one place of employment, Portsmouth. It was not suggested that any duties were performed in London. In the present case there is a finding of fact that the taxpayer's duties commenced at the moment he was first contacted by the hospital authorities. This is further emphasised by the finding that his responsibility for a patient began as soon as he received a telephone call and that he sometimes advised treatment by telephone. It is noteworthy that under condition 19 (b) (3) (iv) of his terms and conditions of service the hospital is referred to "where his principal duties lie". There were thus two places where his duty is performed, the hospital and his telephone in his consulting room. If he was performing his duties at both places then it is difficult to see why, on the journey between the two places, he was not equally performing his duties. Indeed counsel for the Crown did not contend to the contrary. It follows that he had to get from his consulting room to the hospital by car to treat the emergency. The travelling expenses were, in my view, necessarily incurred in the performance of the duties of his office.
I would allow the appeal.