Legislation
What section is the charging provision found under all 3 Income Tax Statutes?
s.5
What terms are used to describe transactions where money is received and where money is spent?
Receipt and expenditure
Insurance for loss of stock is generally regarded as income. True or false?
True. Gliksten v Green [1929] - insurance payment for loss of timber from fire taxed as income.
Employees can only be taxed on salary. True or False?
False. Employees can be taxed on all profits and gains arising from employment that are classified as income.
Why did the court in Jones v Leeming find that the sale of the rubber plantation was NOT in the nature of trade?
s.100 For the purposes of sections 98, 99, 125(1)(a) and 125(2)(a), the expression “emoluments” means all salary, wages, overtime, bonus, remuneration, perquisites including the value of board and lodging, stipend, commission or other amounts for services, directors’ fees, retiring allowances or pension...
Income tax is not charged on losses. What two words describe what income IS charged on?
Profits and gains.
Which margarine case is this statement taken from, and what happened in the case?
"The Income Tax Acts nowhere define ‘income’ any more than they define ‘capital’; they describe sources of income and prescribe methods of computing income, but what constitutes income they discreetly refrain from saying. Nor do they define ‘profits or gains’…"
Case: van der Berghs v Clarke [1935]
Money paid as 'damages' for end of profit sharing agreement was NOT taxable income because the company was in the business of margarine. Therefore, the money did not derive from the business of the company.
In Weston v Hearn, employees were given bonuses after 25 years service. Was this assessed as income or capital?
Income
Which case held that payments for writing a series of newspaper articles amounted to income?
Hobbs v Hussey
What are the 4 main sources of income listed under s.5 of the Barbados Income Tax Act?
(a) business
(b) property
(c) offices
(d) employment
Which case set out the 'common sense' approach? Identify at least one factor of the approach.
BP Australia v Commissioner of Taxation Australia
(a) the character of the advantage sought,
(b) the manner in which the advantage was to be used, relied upon or enjoyed, and in which recurrence might play a part; and
(c) the means adopted to obtain the advantage,
In Kelsall Parsons v IR, £1500 paid for the termination of an agreement was assessed as income.
Why?
The payment was considered to be loss of profits in the last year that the contract did not run.
In which two sports cases, were athletes were given payments that were classified as capital? Explain the reasoning of the courts.
Seymour v Reed - payment from benefit matches was a personal gift that did not arise from employment
Moore v Griffiths - £1000 for winning World Cup was not a reward for services, but a testimonial
In Jenkinson v Freedland, the sale of two refurbished metal sills for a profit to companies that the taxpayer controlled were found to be capital transactions. Why?
The sale was an advantage but not a trading advantage because he only intended to sell them to the companies that he controlled.
The TT charging provision goes from (a) - (m).
The Jamaican charging provision goes from (1) - (?).
7
Which word is used to describe the ability to reduce tax liability where expenditure is classified as income?
Deductible
In Glenboig Union Fireclay Co Ltd v IRC, the court found that payments made to stop the taxpayer from exploiting fireclay fields were to be assessed as capital.
Explain the reasoning in this case.
The payment was not earned from carrying on trade, but rather from refraining from trade. The taxpayer was a no longer able to make profit from the asset.
Which case apportioned between income and capital for a residence, and why?
Westcott v Bryan - not all expenditure was for the director's benefit
Explain the difference between Isweara v CIR (children's schools) and McClelland v Commissioner of Tax of Australia (brother and sister inheritance).
Iswera - arrangements were made for sale before she carried out the purchase
McClelland - the purpose of selling was to retain the land
Explain the relationship between legislation and case law in this course.
The legislation is the starting point. It provides sources of income but does not define income. The case law is used to determine whether a transaction is to be classified as income or capital.
What is the income/capital dichotomy?
The income-capital dichotomy lies at the core of income tax law because it determines whether an item is taxable or not. Given that ‘income tax’ only extends to ‘income’, anything that is capital falls outside the scope of the law. As a result, the income-capital dichotomy acts as a filter for what is actionable under income tax law. This is especially relevant when establishing what is assessable income and deductibles. Despite the central importance of the income-capital dichotomy, both aspects of the concept, ‘income’ and ‘capital’ remain undefined. The consequence of this is dependent on the perspective from which it is viewed. For some, it may create uncertainty which undermines the law. For others, it may create flexibility, allowing the law to evolve without Parliamentary input.
Explain the difference in outcome in Wolf Electric Tools v Wilson (capital) and Musker v English Electric Co.
Wolf Electric Tools - shares for the transfer of technical knowledge was assessed as capital because it was a transfer of the know how
Musker v English - sharing of manufacturing techniques for ongoing payment was income because they traded IN the know how
Dale v De Soissons and Heywood v Comptroller General of IR came to opposite findings on termination payments. Explain the difference.
Dale v De Soissons - INCOME - agreement accounted for termination payment before end of employment contract so considered a profit from employment
Heywood - CAPITAL - taxpayer had a prospect of being employed until retirement and payment was made as compensation for loss of employment due to amalgamations
Name the 6 badges of trade identified by the 1955 Royal Commission on Taxation of Profits and Income
1.Nature of the subject matter
2.Adaptations/modifications made
3.Frequency of similar transactions
4.Duration for which property is held after acquisition
5.Circumstances for realisation
6.Intention at time of acquisition/motive