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TMI Blog1960 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors, bonuses based on salary. The bonuses were usually paid to him in June and before Christmas in each year. In the material year, 1955-56, he received his usual bonuses and there was no issue before the special commissioners as to his liability to be assessed under rule 1 of Schedule 9 to the Act in respect of that salary and those bonuses. 3. In 1955 the board of directors of Anglo-Oriental decided to give to all its male staff, other than executives, a Christmas present up to the value of GBP 15 of clothes, suitable for wear at the office, drawn from a choice from, or a combination of, a suit, overcoat or raincoat; the clothes to be purchased by Anglo-Oriental from Montague Burton Ltd. (hereinafter called "the tailors"). A letter to this effect was sent by Anglo-Oriental to the tailors on November 7, 1955, and the taxpayer's name was on a list of 22 employees whose names were supplied to the tailors. The letter constituted a formal order to the tailors to supply the goods on behalf of the individuals named in the list and contained the following instructions: "Please supply these with suits, overcoats or raincoats as above and send us your account in due course. We st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the year 1955-56, in addition to the cash emoluments of his employment, an advantage by virtue of that employment which was money's worth, namely, a suit of clothes; that, on the evidence, that advantage of money's worth fell to be measured by the price paid by Anglo-Oriental to the tailors for the suit, that was the sum of GBP 14 15s.; that that sum was, correctly included in computing the amount of the salary, fees, wages, perquisites or profits of the taxpayer from his employment within the meaning of rule 1, Schedule 9, to the Income Tax Act, 1952; and that the assessment for the year 1955-56 ought to be confirmed. 5. It was contended for the taxpayer that, on the evidence, the value of the suit was not salary, fees, wages, perquisites or profits of the taxpayer from his employment within the meaning of rule 1 of Schedule 9 to the Income Tax Act, 1952; that the suit was not an advantage received by him by virtue of his employment which was capable of being turned into money, because his employers would have been displeased if he had sold it; alternatively that, if the value of the suit was an advantage received by him by virtue of his employment which was capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for it by the company. The commissioners decided in favour of the taxpayer that the value was GBP 5. 11. If a payment is made to a third party by arrangement with the employer for the benefit of his employee that is as much for the benefit of the employee as if it was paid direct to him. The fundamental question is whether the employee receives a benefit in cash or in kind. On one side of the line is the case where an employee receives, for example, one of a fleet of his employer's cars; it could not be said that the amount originally spent was expressly for his benefit; when made it was for the employer's benefit. On the other side of the line is the type of case where the employer undertakes to maintain payments to travel agencies for holidays for employees. The present case is on that side of the line. It is relevant that the taxpayer was told the amount of the gift. It might be different if he had been told to choose from a range of clothing without specifying the amount. 12. The relevant facts are that here there was a money payment, which was the price of the suit chosen and supplied to the taxpayer. Secondly, the company told the taxpayer of their intention to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is taxed on the amount expended and not on the value of the thing provided. The price which it would fetch if sold in the open market is not a relevant consideration. In Nicoll (Inspector of Taxes) v. Austin[1935] 19 Tax Cas. 531, Finlay J. held that the outgoings and the expenses of the upkeep of the taxpayer's house and garden, paid by his employers, were money's worth and a perquisite of the employee and taxable, although the payments did not produce anything which the taxpayer could turn into money. In this respect there is nothing which suggests that the gardener was employed and paid by the employee. In Hartland v. Diggines[1926] A.C. 289, 292, H.L, Lord Cave L.C. said, in regard to the payment of an employee's income tax by his employers, that while he did not receive cash he received money's worth and was accordingly properly assessed to tax in respect of the amount of income tax paid on his behalf. The solution of the problem depends on what is meant by the receipt of money's worth. In Tennant v. Smith[1892] A.C. 150, 159; 8 T.L.R. 434; 3 Tax Cas. 158, H.L., the question was whether a bank official's obligation to live on the bank premises was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no problem. The face value of the voucher is the benefit. The subject-matter of the gift is what the donee chooses. The position would not have been different here if the suit had been in the first instance delivered to the company. The suit itself was the money's worth. If that is right the Crown's case fails on authority. In Tennant v. Smith([1892] A.C. 150; 8 T.L.R. 434; 3 Tax Cas. 158, H.L the employee acquired a right to occupy a house but he could not part with the possession of the house. This is like the share case of Ede (Inspector of Taxes) v. Wilson & Cornwell[1945] 26 Tax Cas. 381; [1945] 1 All E. R. 367. 17. In this case there was no privity of contract between the taxpayer and the tailors. The whole issue is what is the money's worth which the taxpayer got, was it the payment which the employers made or was it the benefit which the taxpayer got from the payment. What the employer pays does not lead directly to a benefit of a similar amount to the taxpayer. It is submitted: [1945] 26 Tax Cas. 381; [1945] 1 All E. R. 367. that for a benefit derived from an office or employment to be taxable the benefit must be money or money's worth. That is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be able to acquire from them a choice from or combination of the following: Suit, overcoat raincoat. The bill will be sent to the Trust, and it is stressed that no cash payment either way can be made between GBP 15 and the actual cost of the goods. 21. Please take this letter with you when you visit Messrs. Montague Burton, which can be done on or after Thursday, November 10, 1955. Messrs. Montague Burton will provide a fitting if this is required and asked for. They will also make alternations if required. Both fittings and alterations will take additional time." 22. On the same date the company wrote to Montague Burton Ltd. of 112, Cheapside, and the letter is as follows: "We write with reference to the visit of Mr. W. Peter Spens on November 4, 1955. This company, a subsidiary of London Tin Corporation Ltd., has decided to give its male staff a Christmas present (purchased from Messrs. Montague Burton Ltd.) up to the value of GBP 15 of clothes suitable for wear at the office drawn from a choice from or combination of a suit, overcoat or raincoat. We enclose a copy of a letter which we will write to each male member of the staff whose names are given below, "and then there f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, the value of clothing is very much reduced the moment it can be called second-hand. In any case, the value is one which has been mutually accepted and agreed and nothing turns upon it. It may have been agreed at a low figure to discourage any cross-appeal by the taxpayer. If so, it has achieved its purpose, for it is now accepted on his behalf that he is rightly taxed, as the judge in the court below held, upon the money value of what he got. I can now state again the point: What must be regarded for the purpose of the paragraph in the Ninth Schedule of the Act as the perquisite or profit from the taxpayer's employment? The case for the Crown, which Mr. Magnus presented with clarity and attraction, can I think be summarised in the way in which he put it at the end of his argument: "I say" (and I read from my note of the argument) "that where the employee accepts an offer from his employer to spend money on his behalf, then he is chargeable on the money spent, and not on the value of the thing bought for him." 27. If that is a correct statement of the true nature of this transaction, it may be that the conclusion follows. Mr. Magnus referred to a few cases-gratefully, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then only) the taxpayer got something which was his own. He acquired at that point of time a suit, albeit he had no right against anyone to get the suit. Nor had he, as I conceive, any right against the company, though as a matter of ordinary decency as between master and servant he could no doubt rely upon the company doing what they said they would do. But this was not a case in which he was entitled to call upon the company to pay some sum of money on his behalf, as that phrase is ordinarily understood. 31. If I have incurred a debt--for example, my debt due for income tax comparable to Hartland v. Diggines [1926] A.C. 289--and my employer chooses to discharge that debt for me, then it is no doubt true that what I have received in money or money's worth is the equivalent of the debt; and the sum of money is, therefore, properly brought within the scope of the charge. But as I think in this case, and in accordance with Mr. Heyworth Talbot's argument, what the taxpayer got-what the company intended to give him, what the letter to him and Montague Burton said would be done, and was done--was a present of a suit. Until he got it, he got nothing; and when he got it, the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a conventional matter the difference can be taken as that between GBP 14 15s. and GBP 5. Income-tax is a tax levied on income. The taxpayer has to pay on what he gets. Here he has got a suit. He can realise it only for GBP 5. The advantage to him is, therefore, GBP 5. The detriment to his employer has been considerably more, but that seems to me to be irrelevant, and I do not see that it makes any difference that no property in this suit ever passed to the employer. 36. I think, in Lord Watson's words in Tennant v. Smith [1892] A.C. 150, 159; 8 T.L.R. 434, H.L that it is a benefit consisting in "something acquired which the acquirer becomes possessed of and can dispose of to his advantage--in other words, money, or that which can be turned to pecuniary account." This can be realised in cash, and it is that realisable quality which is the measure of the taxpayer's liability. 37. I would therefore dismiss the appeal. 38. DONOVAN L.J. I agree, and I add a few words only because of the novelty of the point. 39. The case wears an aspect of triviality which is deceptive. Tax on GBP 15 alone is involved, but the proposition on which the claim is based is of much wider signif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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