Owen v Pook (Inspector of Taxes)
[1969] 2 All ER 1(Decision by: Lord Pearson)
Owen
v Pook (Inspector of Taxes)
Judges:
Lord Guest
Lord 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
Decision by:
Lord Pearson
My Lords, I have found this case difficult. On the one hand, the taxpayer has been unfairly dealt with, inasmuch as his necessary professional expenses of travelling between Fishguard and Haverfordwest have not been allowed as deductions in the assessment of his net income from the exercise of his profession. On the other hand, it seems to me that, when the taxpayer's position is analysed, the unfairness is attributable to a defect in the system of assessment and not to any misunderstanding or misapplication of the rules or provisions of Sch E, nor to any error as to the meaning of the word "emoluments". There is a wrong, but the remedy would have to be found in a change of the system and not in a decision in favour of the taxpayer on either of the issues in this appeal.
The taxpayer works as a doctor treating patients in two ways:
- (i)
- as a general practitioner in Fishguard;
- (ii)
- as an obstetrician and anaesthetist in part-time employment at the hospital in Haverfordwest.
These are two aspects of his professional career, two professional activities. Whether he is working at his consulting room at his home in Fishguard, or on his rounds in and from Fishguard, or at the hospital in Haverfordwest, he is working as a doctor, making use of his professional learning, skill and experience for the benefit of his patients and receiving remuneration for doing so. The expense of his journeys between Fishguard and Haverfordwest is a necessary expense of his profession as he carries it on, because he could not engage in both activities without making these journeys. He pays taxes on his income from both activities, and it is unfair not to allow him to deduct expenses which he must inevitably incur so long as he carries on both activities.
But the system apparently requires that his earnings from his general practice have to be assessed separately under Sch D and his earnings from his employment at the hospital have to be assessed separately under Sch E. The unfairness results from this separation of his two professional activities for purposes of assessment to tax, because the expense of the journeys between Fishguard and Haverfordwest is not an expense of either of the activities taken separately but is an expense of combining the two.
It is clearly not necessary for his general practice at Fishguard that he should make these journeys to Haverfordwest and back. Under the rules or provisions of Sch E, as they have been authoritatively interpreted, these journeys cannot be regarded as necessary for his employment at the hospital. For the purposes of that employment he does not have to live at Fishguard or anywhere outside Haverfordwest. The expense of travelling to and from Haverfordwest is not an expense which he incurs ex necessitate of his employment. It is not an expense which any holder of the employment would have to incur wherever his home might be. The employment is not an itinerant employment. These journeys are made by him on the way to his employment and in returning from it. They are not made in the course of his employment or in the performance of his duties therein. On this point the present case seems to me to be indistinguishable from Ricketts v Colquhoun (Inspector of Taxes) , where the principle was very clearly established. Lord Blanesburgh said ((1925), 10 Tax Cas at pp 135, 136; [1926] AC at pp 7, 8):
"... 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 ... 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 travelling expenses of the Appellant from London to Portsmouth and back are, in my judgment, excluded from the benefit of the Rule both by the application of the test I have indicated as relevant and also for another reason quite separate. The expenses covered by the words 'the expenses of travelling in the performance of the duties of the office', are, I think, limited to those which the Master of the Rolls has well termed 'itinerant expenses'. There are none such here ... That the Appellant travelled from London to hold his Courts at Portsmouth and returned to London at the close of the Sessions was, in my judgment, a course prescribed for him by his own convenience as a practising London barrister and by nothing else."
Counsel for the taxpayer sought to distinguish the present case from Ricketts v Colquhoun on the ground that in the present case the hospital employment is at two places-the taxpayer's home, at which he receives the telephone calls and gives advice on the telephone, and the hospital-and that he comes on duty when he receives the telephone call and remains on duty while he makes the journey to the hospital and does his work at the hospital. But I do not think it can reasonably be said that there are two places of employment. His only place of employment is at the hospital. Because for his own purposes-purposes other than the hospital employment-he chooses to live away from Haverfordwest he has to be summoned to the hospital and has to come from a distance and so make a car journey. Also because he lives for his own purposes at a distance from Haverfordwest he may have usually to give advice on the telephone as to the interim treatment of the patient until he arrives at the hospital. If immediate advice on the telephone is required, it could be given equally well from a home in Haverfordwest. It is no part of the duties of his hospital employment to live in Fishguard, and the journeys are not made in performance of his duties in the employment. In my view, the principle established in Ricketts v Colquhoun is applicable in this case and does not permit deduction of the travelling expenses in making the assessment under Sch E. There was the same unfairness in Ricketts v Colquhoun as there is in this case, and it was in that case, as it is in this case, attributable to the artificial division of the professional earnings between Sch D and Sch E.
The other question in the appeal is whether the travelling allowance which the taxpayer receives from the hospital authorities constitutes an "emolument" of his employment. I would arrive at the answer in this way. Suppose that A, B and C are employed each at a salary of £500 per annum, and in the first year each has to pay entirely out of his own pocket the expenses of travelling between his home and his place of work. Then, in the second year the employer re-imburses to A the cost of his season ticket or gives him an allowance of (say) 8d per mile for coming to work and returning home by car. A is better off financially by the amount of the re-imbursement or allowance. He is better off than he himself was in the first year, and better off than B and C who still have to pay entirely out of their own pockets the expenses of travelling between their homes and their places of work. As A has effectively a better income than B and C, he ought to pay more income tax than they do. The re-imbursement or car allowance is a benefit to A and is a sum of money. In my opinion, it is a perquisite, a profit, an emolument.
There is a quite different position when the employee incurs an expense in performing the duties of his employment-eg, making a journey from head office to branch office and back to head office, or buying stamps and stationery for the firm-and has it re-imbursed to him. In such a transaction there is no benefit-no profit or gain-to the employee. He does not receive any emolument.
Although the result is unfair, I do not think it can properly be corrected without a change in the system eliminating the artificial division of the professional income between Sch D and Sch E. In my opinion, the issues raised in this appeal should be decided in favour of the Crown, and I would dismiss the appeal.
Appeal allowed.