| 22/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 94 |
Decided: 27 June, 1973 |
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Retiring Gratuity Mutual Trading Distributions By An Insurance Company. Receipts From A Staff Provident Fund Additional Penal Tax. Unemployment Benefit
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The taxpayer's former employees had a Staff Indemnity Fund. This was funded by special donations which the employers from time to time made. The Board of Special Commissioners had in another case held that retiring gratuities were exempt where the payment was "ex gratia" not "ex jure". In this case, the employer could end up by receiving nothing, although this was unlikely. The sum received was therefore exempt. The Court of Appeal agreed. (Note: this issue remains somewhat unclear).
The appellant was also entitled each year to profits under a life insurance policy. These were credited to him each year. Taxpayer claimed that these were profits from mutual trading, and hence exempt. Both the Board and the Court disagreed. (Note: this issue is now statutorily regulated). Taxpayer was also entitled to payments from a Staff Provident Fund, a large part of which originated from interests credited each year. He claimed that these interests should have been taxed in the years when they were credited (mostly in pre-Income Tax years) and not when he received his benefits from the Fund. The Board and the Court disagreed as he had no right to the interest while it was being credited: his entitlement arose when he terminated his membership of the scheme.
The taxpayer also claimed that unemployment benefit was not taxable. This was rejected by the tribunals, quoting that part of the law which taxed "Any sum realized under any insurance against a loss of profits shall be taken into account in the ascertainment of any profits or income." Presumably this was done on the basis that the payments were effected under social security arrangements through the their National Insurance arrangements. (Note: Probably, such benefits would now be taxed under the sweeping-up provisions of the charging section of the Income Tax Acts)
The tribunals also refused to interfere with the exercise by the Commissioner of his discretion regarding the application of additional penal tax, as the discretion appeared to have been legally exercised.
BSC Case No: 32/71
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