Hochstrasser v Mayes
A payment made to an employee is taxable as an emolument from his employment only if it is a reward for his services, so compensation for a loss on the sale of his house under a housing scheme was not taxable.
Facts
Imperial Chemical Industries operated a housing scheme for employees who were required to move to work at different locations. Under the scheme, ICI guaranteed the value of houses bought by employees, and agreed to compensate them for any loss on the sale of the house if they were transferred. Mr Mayes, an employee, sold his house at a loss when he was transferred, and ICI paid him 350 pounds under the scheme. The Inland Revenue argued that the payment was an emolument from his employment.
Legal principle
The House of Lords held that the payment was not taxable. Viscount Simonds said that a payment is an emolument from employment only if it is made in reference to the services the employee renders by virtue of his office, and is something in the nature of a reward for services past, present or future. It was not enough that the employee would not have received the payment unless he had been an employee. The payment was made to compensate Mr Mayes for a loss on the sale of his house, which he incurred as a house owner and not as an employee, so it did not arise from his employment.
Related cases on income and corporation tax: employment, trading and residence
- Edwards v Bairstow [1956] AC 14
- Jones v Garnett [2007] UKHL 35
- Mallalieu v Drummond [1983] 2 AC 861
- Marks & Spencer plc v Halsey (2005) Case C-446/03
- Pepper v Hart [1993] AC 593
- R (Gaines-Cooper) v Revenue and Customs Commissioners [2011] UKSC 47
- RFC 2012 plc v Advocate General for Scotland [2017] UKSC 45
- Shilton v Wilmshurst [1991] 1 AC 684
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