Tax Cases Ch 4-6 Flashcards
Smart v Lincolnshire Sugar Co Ltd
Received weekly ‘advances’ to, amongst other things, help them pay sugar beet growers prices agreed under contract. The payments were held to be revenue receipts because they helped the company meet its trading obligations
Received weekly ‘advances’ to, amongst other things, help them pay sugar beet growers prices agreed under contract. The payments were held to be revenue receipts because they helped the company meet its trading obligations
Smart v Lincolnshire Sugar Co Ltd
White v G & M Davies
Dairy farmers received grant to become beef farmers for 4 years. Grant was compensation for the loss of income from milk production, and was calculated by reference to this loss. Receipts therefore held to be revenue as they were a contribution to revenue receipts.
Dairy farmers received grant to become beef farmers for 4 years. Grant was compensation for the loss of income from milk production, and was calculated by reference to this loss. Receipts therefore held to be revenue as they were a contribution to revenue receipts.
White v G & M Davies
Burman v Thorn Domestic Appliances (electrical) Ltd
Received a grant to cover interest payments on a loan received to build a new factory. Grant was held to be a revenue receipt as it was specifically paid as a contribution to a revenue expense (interest).
Received a grant to cover interest payments on a loan received to build a new factory. Grant was held to be a revenue receipt as it was specifically paid as a contribution to a revenue expense (interest).
Burman v Thorn Domestic Appliances (electrical) Ltd
Ryan v Crabtree Denims Ltd
Company received a grant to enable it to keep people in employment. As no capital or revenue purpose was designated, and was therefore undifferentiated, it was a revenue receipt
Company received a grant to enable it to keep people in employment. As no capital or revenue purpose was designated, and was therefore undifferentiated, it was a revenue receipt
Ryan v Crabtree Denims Ltd
Watson v Samson Bros
Farmers received subsidy to replace or restore grassland damaged by sea floods. Found to be capital as contributed to the creation or restoration of a capital asset. The fact that some of the payment covered lost profits was irrelevant as that was not the purpose of the payment
Farmers received subsidy to replace or restore grassland damaged by sea floods. Found to be capital as contributed to the creation or restoration of a capital asset. The fact that some of the payment covered lost profits was irrelevant as that was not the purpose of the payment
Watson v Samson Bros
British Commonwealth International Newsfilm Agency v Mahany
Provided a newsfilm service to Rank Ltd and BBC, they paid annual payments to cover half its trade deficits. Found to be revenue as the purpose was to supplement receipts.
Provided a newsfilm service to Rank Ltd and BBC, they paid annual payments to cover half its trade deficits. Found to be revenue as the purpose was to supplement receipts.
British Commonwealth International Newsfilm Agency v Mahany
Knight v Calder Grove Estates
Company bought land off a farmer for £2k, so that it could extract coal from it. Agreed to sell it back to him for £500. They claimed both amounts as revenue on the grounds that the coal was circulating capital. Courts held it to be capital; it was a land purchase, an enduring asset, and the fact that the adventure was only temporary was irrelevant.
Company bought land off a farmer for £2k, so that it could extract coal from it. Agreed to sell it back to him for £500. They claimed both amounts as revenue on the grounds that the coal was circulating capital. Courts held it to be capital; it was a land purchase, an enduring asset, and the fact that the adventure was only temporary was irrelevant.
Knight v Calder Grove Estates
Coltness Iron Co v Black
Mining business who tried claiming cost of sinking pits as a revenue expense. Judge found that set up costs of mining, includingacquisition of and obtaining access to sites and minerals, were capital.
Mining business who tried claiming cost of sinking pits as a revenue expense. Judge found that set up costs of mining, includingacquisition of and obtaining access to sites and minerals, were capital.
Coltness Iron Co v Black
Golden Horseshoe (New) Ltd v Thurgood
Purchased residue of gold mining which they re-treated and sold on. Courts agreed the costs were revenue, because the residue had already been ‘won’ from the soil, and so the money was akin to that spent on stock in trade
Purchased residue of gold mining which they re-treated and sold on. Courts agreed the costs were revenue, because the residue had already been ‘won’ from the soil, and so the money was akin to that spent on stock in trade
Golden Horseshoe (New) Ltd v Thurgood
Rogers v Longsdon
Farmer sold the right to remove minerals from land which contained waste material from a former leadworks. Buyer had to disturb soil, trees and grass to gain access. Courts held that as the minerals had once again become part of the land, the cost of the land was capital
Farmer sold the right to remove minerals from land which contained waste material from a former leadworks. Buyer had to disturb soil, trees and grass to gain access. Courts held that as the minerals had once again become part of the land, the cost of the land was capital
Rogers v Longsdon
CIR v Pilcher
Fruit grower bought the freehold to an orchard, which including trees bearing ripe fruit. He claimed the cost of the fruit as a revenue expense, based on him buying stock in trade. Courts held that as what he had actually bought was the capital asset that was the orchard, it was a capital expense. FOLLOW THE FACTS - had the contract been written differently, he could have treated it differently, but in reality the whole amount was capital
Fruit grower bought the freehold to an orchard, which including trees bearing ripe fruit. He claimed the cost of the fruit as a revenue expense, based on him buying stock in trade. Courts held that as what he had actually bought was the capital asset that was the orchard, it was a capital expense. FOLLOW THE FACTS - had the contract been written differently, he could have treated it differently, but in reality the whole amount was capital
CIR v Pilcher
Vallambrosa Rubber Co Ltd v Farmer
Owned a rubber plantation, of which only 1/7 could produce rubber. Whole plantation was tended and weeded, and this was all allowed as a revenue expense despite 6/7 of the plantation not contributing to the profit. Company also built infrastructure (roads, drains etc), which was held to be capital expenditure as it was incurred once and for all and created an enduring benefit of the trade
Owned a rubber plantation, of which only 1/7 could produce rubber. Whole plantation was tended and weeded, and this was all allowed as a revenue expense despite 6/7 of the plantation not contributing to the profit. Company also built infrastructure (roads, drains etc), which was held to be capital expenditure as it was incurred once and for all and created an enduring benefit of the trade
Vallambrosa Rubber Co Ltd v Farmer
General Reversionary & Investment Co Ltd v Hancock
Purchased an annuity to take over the regular pension payments to a former employee, with his full knowledge and agreement. Courts agreed the lump sum payment was a revenue expense as whilst the method of payment had changed, its character had not
Purchased an annuity to take over the regular pension payments to a former employee, with his full knowledge and agreement. Courts agreed the lump sum payment was a revenue expense as whilst the method of payment had changed, its character had not
General Reversionary & Investment Co Ltd v Hancock
Morgan Crucible Co Ltd v CIR
Purchased an annuity from an insurance company, which paid out the same amounts as the company then paid to its former employees as pensions. The employees knew nothing of the arrangement and would have had no recourse against the insurance company had the payments stopped. Courts held lump sum paid for the annuity was capital as an identifiable asset had been gained which did not remove a revenue obligation, but rather allowed them to meet it ina different way.
Purchased an annuity from an insurance company, which paid out the same amounts as the company then paid to its former employees as pensions. The employees knew nothing of the arrangement and would have had no recourse against the insurance company had the payments stopped. Courts held lump sum paid for the annuity was capital as an identifiable asset had been gained which did not remove a revenue obligation, but rather allowed them to meet it ina different way.
Morgan Crucible Co Ltd v CIR
Atherton v British Insulated and Helsby Cables Ltd
Paid lump sum to set up a trust fund to pay for staff pensions. Fund itself was not an asset due to it being an independent trust. However, the judge found that the payment had brought into existence an enduring benefit of the trade in that it created a contented staff.
Paid lump sum to set up a trust fund to pay for staff pensions. Fund itself was not an asset due to it being an independent trust. However, the judge found that the payment had brought into existence an enduring benefit of the trade in that it created a contented staff.
Atherton v British Insulated and Helsby Cables Ltd
BP Australia Ltd v Australia Commissioners of Taxation
Offered lump sum payments to petrol stations in return for their agreement to buy only BP petrol. Payments held to be revenue as they obtained a trading advantage; securing orders for petrol in the face of increasing competition, in a manner which became part of the normal process of selling petrol.
Offered lump sum payments to petrol stations in return for their agreement to buy only BP petrol. Payments held to be revenue as they obtained a trading advantage; securing orders for petrol in the face of increasing competition, in a manner which became part of the normal process of selling petrol.
BP Australia Ltd v Australia Commissioners of Taxation
Commissioners of Taxes v N’Changa Consolidated Copper Mines Ltd
One copper mine paid to cease production, in order to help stabilise the global copper market. Lump sums paid by other group companies as ‘compensation’ were held to be revenue in nature, as they were costs incidental to production and sale of copper.
One copper mine paid to cease production, in order to help stabilise the global copper market. Lump sums paid by other group companies as ‘compensation’ were held to be revenue in nature, as they were costs incidental to production and sale of copper.
Commissioners of Taxes v N’Changa Consolidated Copper Mines Ltd
Strick v Regent Oil Co Ltd
Company paid lump sums to petrol retailers to lease their premises, then sub-let them back. Sub-let agreement included conditions re exclusive purchase and sale of petrol. Lump sum payments found to be capital as although they gained a trading advantage, they did so via the acquisition of a capital asset - an interest in land - which they could enforce that advantage.
Company paid lump sums to petrol retailers to lease their premises, then sub-let them back. Sub-let agreement included conditions re exclusive purchase and sale of petrol. Lump sum payments found to be capital as although they gained a trading advantage, they did so via the acquisition of a capital asset - an interest in land - which they could enforce that advantage.
Strick v Regent Oil Co Ltd
Walker v The Joint Credit Card Company
Paid £75k to a rival company for it to cease trading. Claimed it was revenue as no enduring benefit was gained due to the rival company being insolvent. Courts held the payment was capital as they got the benefit of being the only Interbank agent in the UK, and stronger and more enduring goodwill after losing an unscrupulous rival.
Paid £75k to a rival company for it to cease trading. Claimed it was revenue as no enduring benefit was gained due to the rival company being insolvent. Courts held the payment was capital as they got the benefit of being the only Interbank agent in the UK, and stronger and more enduring goodwill after losing an unscrupulous rival.
Walker v The Joint Credit Card Company
