TaxTMI 
TaxTMI 
1959 (11) TMI 55
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.... paid or credited to him pursuant to an agreement dated June 1, 1951, known as "the housing agreement" and made between Imperial Chemical Industries Ltd. (hereafter referred to as "I.C.I.") of the one part and the respondent of the other part. He was employed by I.C.I. under a service agreement at a salary which at the material time was some 820 a year. The facts, stated by Viscount Simonds, were as follows: The respondent was a married man with two children who were born in 1949 and 1953. He had been employed by I.C.I. since 1941, at which time he lived with his parents at Welwyn in Hertfordshire. His first employment was as a laboratory assistant. In September, 1950, he was transferred to the I.C.I. works at Hillhouse in Lancashire on appointment as an assistant technical officer (chemist). During the first few months, which were a probationary period, he lived in rooms. On April 27, 1951, he entered into a service agreement with I.C.I. of which for the purpose of this case the salient feature was that he agreed to serve anywhere in the United Kingdom of Great Britain and Northern Ireland, and that I.C.I. should be at liberty to change the locality of his employment within tho....
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....he employee or his personal representatives within 12 months after (A) the refusal by I.C.I. of an offer made on transfer under (i) above, or (B) the retirement of the employee, or (C) the death of the employee (whichever first happens) I.C.I. becomes liable to pay to the employee or his personal representatives the amount if any whereby the price realised on such sale falls short of the employee's expenditure on the house. (See clause 3 W.) (iii) If the house is not 'sold before the expiration of the period of 12 months mentioned in (ii) above, then there is to be a valuation of the house and I.C.I. becomes liable to pay to the employee or his personal representatives the amount (if any) whereby the employee's expenditure oil the house exceeds the amount of the valuation. (See clause 3(2).) (iv) If at any time before such one of the three events mentioned in (ii) above as shall first happen the employee while still in the service of I.C.I. desires to sell the house he may do so, but in that case he is only to be entitled to the benefit of I.C.I.'s guarantee....
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....ugh a man might be willing to buy a house in the new location, his chief worry was the loss he might make if he had to sell the house. I.C.I. try to operate a staff policy which results in a contented staff. Unless the staff are contented they do not do their best work. I.C.I. therefore introduced the housing scheme so that they should have employees whose minds were eased to some extent of the worry of possible financial embarrassment in the future arising out of the removal occasioned by the company's action. The agreement cannot operate unless and until the house is sold for less money than it costs to buy. Under the housing agreement the employee cannot make a profit as a result of the housing agreement. An employee's salary is calculated quite independently of anything he might receive under the housing agreement. I.C.I. salaries compare favourably with salaries paid by other employers not operating a housing scheme." Upon these facts the commissioners held that the sum in question was not assessable to tax. Their reason was that the payment was to meet a capital loss incurred by the respondent in fulfilling the obligations of his employment. This was not precisely ....
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....e some consideration not merely colourable moving from the employee, but it would not be full consideration for the benefit received. That is analogous to the present case. It cannot be the law that provided there is some consideration moving from the employee, then the whole of the benefit received by him is not a profit of the office. Again, a company might have a scheme under which it undertook to pay the rent of any employee living within 10 miles of its works. There would be some consideration in the consequent advantage to the company, but the obligation on the employees would not represent full consideration in money or money's worth for the payment of their rent. Where there is some genuine consideration, but it is plainly inadequate, the court must make an apportionment as best it can. Here there is no consideration in money or money's worth. The only positive obligation on the respondent is to give I.C.I. the first refusal of the house. That is no pecuniary detriment to him, since it is a first refusal at market value. One must look at the matter from his point of view. It is irrelevant that the bargain is in form a bargain made at arm's length. The only qu....
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.... 225, 229; [1931] 145 L.T. 225, 233 (C.A.); [1932] 146 L.T. 510, 515 518 (H.L.)) and Cameron v. Prendergast(10), cases of lump sums paid to company directors, it could not be said that the payments were made in respect of their offices. Beak v. Robson([1939] 160 L.T. 210, 211 (C.A.); [1939] 1 All E.R. 223; [1940] A.C. 549, 557-558 (H.L.); 56 T.L.R. 499; [1940] 2 All E.R. 35; 8 I.T.R. (Suppl.) 75) is a similar case. A payment made to all employees is a profit of the office and is not given to any employee in his personal capacity. If the facts were that the company had requested the employee to buy a house, and he had done so on the faith of the scheme, that would be different from the present case. One would have to see whether from the point of view of the employee he had given full consideration. But purchasing a house of one's own volition could never be consideration moving to the employer. As to payments to directors, see also Tilley v. Wales [1942] 2 K.B. 149, 150 (C.A.); [1942] 1 All E.R. 639, 640-641; [1943] A.C. 352. 355 (H.L.); 59 T.L.R. 90; [1943] 1 All E.R. 46; 11 I.T.R. (Suppl.) 23 which indicates that if there is some real consideration moving from the emplo....
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....llacious. Here the consideration moving from the respondent for the sum received was a consideration other than services rendered or to be rendered. Even if (contrary to the respondent's contention) the housing agreement was wholly for the employee's benefit, it does not follow that a payment under that agreement is made in respect of services. The payment was made to the respondent otherwise than as an employee. It was made to the respondent who had a particular house and had entered into a particular agreement about it. He is identifiable, not because he was an employee, but because he was a party to this agreement about this house. His services were not the causa causans of the payment. The respondent adopts what Jenkins and Pearce L.JJ. said in the Court of Appeal. It is not true to say that, if the House of Lords does not accept the appellant's propositions, sums paid by an employer to an employee in recoupment of losses can never be taxable. The question will always be: Is the payment for services or is it not? The onus in this should not be shifted onto the taxpayer. On the facts of this case there was sufficient consideration for the payment. Where an a....
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....altered his position for the worse in law by entering into the agreement. The fact that one agreement might operate after the other had ended emphasises the separateness of the service agreement and the housing agreement. H.H. Monroe following. The consequences of the decision in the Westminster case were dealt with by section 28 of the Finance Act, 1946 (now section 415 of the Income Tax Act, 1952). Suppose the respondent's house bad gone up in value when he wanted to move. If he had offered it to I.C.I. he might have received a sum in excess of what he paid for it, thereby making a profit. Yet on the logic of the Crown's argument that sum would not have been taxable because the sale would have been for full consideration. The housing agreement was about this particular house and not about the respondent's services, and the character of the agreement has not changed because the house was sold at a loss. It is not a case of an employer undertaking to stand the loss in relation to a piece of property; the employer also acquires some real rights in relation to the house. john Pennycuick Q.C. in reply. Every receipt in money or money's worth which is received ....
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....p; "1. Tax under this Schedule shall be charged in respect of every public office or employment of profit............. "2. Tax under this Schedule shall also be charged in respect of any office employment or pension, the profits or gains arising or accruing from which would be chargeable to tax under Schedule D but for the proviso to paragraph 1 of that Schedule........... "5. The provisions set out in Schedule IX to this Act shall apply in relation to the tax to be charged under this Schedule." Schedule IX, so far as relevant, was as follows: "Rules Applicable To Schedule E 1. Tax under Schedule E shall be annually charged on every person having or exercising an office or employment of profit mentioned in Schedule E, or to whom any annuity, pension or stipend chargeable under that Schedule is payable, in respect of all salaries, fees, wages, perquisites or profits whatsoever therefrom for the year of assessment, after deducting the amount of duties or other sums payable or chargea....
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....ty, e.g., a benefit conferred out of affection or pity; or (2) it has been received for a consideration other than the giving of services." And he goes on to point out that in these two exceptions, though the benefits are received by him while he is an employee and might not have been received but for his being an employee, yet in his hands the benefit is not a reward for services-a distinction which, abandoning the vernacular, as Younger L.J. had in an earlier case, Pearce L.J. describes by saying [1959] Ch. 22, 61; [1959] 37 I.T.R. 431, 461 that the employment in such a case is a causa sine qua non of the benefit but not the causa causans. Parker L.J. then examines the facts of the case and comes to a conclusion which he expresses in these words [1959] Ch. 22, 56-57; [1959] 37 I.T.R. 431, 457: "Bearing these considerations in mind I find it quite impossible to arrive at any conclusion other than that there is no substantial consideration apart from services." This, put in other words, is a finding that the substantial consideration for the payment by I.C.I. of 350 to the respondent was the rendering of service by him. My Lords, if in such cases as these the issue turns, as I t....
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....se and leave the matter there. For, assuming, as I must assume, that the agreement is not colourable, I doubt whether it is relevant to ask what, if any, consideration moved from the employee and whether it was substantial or sufficient or what you will. Nor, if it became relevant, should I in the present case feel equal to the task of weighing the benefit or detriment enjoyed by the one side or the other. It was a bargain and, as good bargains should be, thought by each side to be worth while. I have the highest authority for my course if I leave it there and "reject the lore of nicely calculated less or more." My Lords, in the course of the argument a considerable number of authorities were cited, some of them decisions of this House. In nothing that I have said have I intended to cast any doubt upon them. I should not be justified in doing so. But I do not apologise for going back to the very words of the statute and ignoring explanatory words like "as such," nor do I think it useful to examine whether an agreement under which payment is made is "collateral". The question is one of substance, not form. I accept, as I am bound to do, that the test of taxability is whether from....
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....from." The test to be applied is the same for all. It is contained in the statutory requirement that the payment, if it is to be the subject of assessment, must arise "from" the office or employment. In the past several explanations have been offered by judges of eminence as to the significance of the word "from" in this context. It has been said that the payment must have been made to the employee "as such". It has been said that it must have been made to him "in his capacity of employee". It has been said that it is assessable if paid "by way of remuneration for his services and said further that this is what is meant by payment to him "as such". These are all glosses, and they are all of value as illustrating the idea which is expressed by the words of the statute. But it is perhaps worth observing that they do not displace those words. For my part, I think that their meaning is adequately conveyed by saying that, 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. It is just because I do not think that the....
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....d to indicate clearly why I do not regard the payment as falling on the side of taxability. On the other hand, I do not find in this decision any qualification of the principle that an employer who pays an employee's personal bills as part of his reward for services rendered is paying a taxable wage or profit under Schedule E. That is a different case. LORD COHEN. My Lords, the facts have been sufficiently stated by the noble and learned Lord on the Woolsack, and I need not repeat them. The question for your Lordships' decision is whether the respondent is liable to income tax under Schedule E on the sum of ? 350 which he received, not under his service agreement with Imperial Chemical Industries Ltd., but under an indemnity contained in the housing agreement entered into between him and the company when, on his transfer to Hillhouse, he bought a house to accommodate himself and his family and received assistance from I.C.I. in the purchase thereof, and an indemnity in certain events against loss on the resale of it for less than the purchase price. The Crown claimed tax on this sum of ?350 as being due under Schedule E in respect of his office or employment with I.C.....
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.... words "in respect of all salaries, fees, wages, perquisites or profits whatsoever therefrom for the year of assessment," he said: "The word 'therefrom' must be construed in its context. A profit accruing by reason of holding an office or employment may be a profit 'therefrom' . This may be so even though some payment which is received is not made by the employer of the recipient and even though the payment is made voluntarily. The profit need not necessarily be in the form of a cash payment. The conception which is introduced by the word 'therefrom' is that some taxable remuneration may accrue to a person by reason of his having or exercising an office or employment of profit. The reference is to what is received by the holder of an office or employment in that capacity: to the holder of the office or employment as such." My Lords, I am prepared to accept that statement of the law, but it is, I think, clear from the final conclusion of Morris L.J. in the case last cited, and from the decisions cited by Jenkins L.J. in his judgment in the present case (see especially Beak v. Robson [1943] A.C. 352 (H.L.); 59 T.L.R. 90; [1943] 1 All E.R. 415; 11 I.T.R. (Su....
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....s the source of the payment sought to be taxed in this appeal. I would dismiss this appeal. LORD KEITH OF AVONHOLM. My Lords, I agree. LORD DENNING. My Lords, Mr. Mayes is a married man with two children. He has for many years been employed by Imperial Chemical Industries Ltd. under a service agreement at a salary which at the material time was some ? 820 a year. It was provided by the agreement that if his employers wished to transfer him from one part of the country to another, they were at liberty to do so, but in that event they were to pay his removal expenses. He was first employed at Welwyn in Hertfordshire, but later he was transferred by the company to Hillhouse in Lancashire. In 1951 he found a house in Lancashire suitable for his needs at a price of ? 1,850. He had only ? 90 of his own, so he had to borrow the rest on mortgage. A building society lent him ? 1,460 at interest and his employers lent him ? 300 free of interest. Imperial Chemical Industries Ltd. had a housing scheme to help employees placed as he was; and it was under this scheme that they lent him the ? 300. His employers also agreed that, if he were to be afterwards transferred to any other part o....