Kelly v. Rogers

[1935]		446
2 K.B.

[KING'S BENCH DIVISION AND COURT OF APPEAL]

KELLY (INSPECTOR OF TAXES) v. ROGERS.

1935 April, 3, 4.

FINLAY J.

1935 July 8, 9.

LORD HANWORTH M.R., ROMER and MAUGHAM L.JJ.

Revenue - Income Tax - Foreign Possessions and Securities - Dividends not remitted to England - Trustee resident in England administering Foreign Trust - Assessability - Residence in Division during Year of Assessment - Removal to another Division before Date of Assessment - Jurisdiction of Commissioners of Original Division to Assess - Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40), Sch. D, Miscellaneous Rules, r. 4 - All Schedules Rules, r. 4.

The respondent, a woman of American birth married to an Englishman and residing in England, was appointed, under the will of her mother, an American citizen, trustee for her sister, whose domicil of origin was American and who suffered under an incapacity. The trust fund in the main consisted of stocks, shares and securities in America:-

Held, by Finlay J. and the Court of Appeal, that the respondent, being in receipt and control of the income of the trust fund, as trustee, was liable to be assessed on the whole of that income

[1935]		447
2 K.B.	KELLY v. ROGERS. (C.A.)

and not merely on that part of it which was brought over to this country and applied for the benefit of her sister, although the income did not arise in this country or under all English trust.

Observations of Lord Cave in Williams v. Singer [1921] 1 A. C. 65 applied.

In 1932 the respondent left the S. division in which she had resided for some years, including the year 1926-27, and went to live elsewhere. In 1933 the Commissioners of the S. division made an assessment on her in respect of the year 1926-27:-

Held, by Finlay J. and the Court of Appeal, that the Commissioners of the S. division had jurisdiction to make the assessment.

CASE stated by Special Commissioners of Income Tax.

At meetings of the Commissioners for the Special Purposes of the Income Tax Acts held on October 16 and 30, 1933, the respondent, Mrs. Amy W. Rogers, appealed against estimated assessments to income tax for the year ending April 5, 1927, in the sum of 1600l. in respect of income from possessions out of the United Kingdom and in the sum of 1600l. in respect of income from securities out of the United Kingdom. These assessments had been made on the respondent in her capacity as trustee under the will of the late Harriette Willmer.

Harriette Willmer, an American citizen, died in New Jersey in 1910. By her will, dated December 18, 1907, she appointed the respondent trustee for her (the testatrix's) daughter, Jennie, "with full power to receive, hold, use, invest, re-invest, sell and manage all and singular the moneys, securities and property of every description given in trust for the benefit of my said daughter, Jennie, by any clause of this will."

The respondent, who was married to an Englishman, had lived in the United Kingdom since 1889, and Jennie Willmer had lived with her since 1910. Jennie Willmer was an incapacitated person within the meaning of General Rule 4, Income Tax Act, 1918. Her domicil of origin was American.

For many years the fund settled by Harriette Willmer on the trusts mentioned had consisted for the most part of stocks, shares and securities in America. The respondent at first brought over from America the sum of 400l. a year, which was spent each year for the maintenance of Jennie Willmer. After a time she brought over 600l. a year, but the balance of 200l. a year was not spent for the maintenance

[1935]		448
2 K.B.	KELLY v. ROGERS. (C.A.)

of Jennie Willmer, but was invested in the United Kingdom to form an emergency fund in view of Jennie Willmer's state of health. The balance of the income of the trust fund was accumulated in America.

Assessments had been made on the respondent as trustee for Jennie Willmer in respect of the sum of 400l. expended each year for her maintenance. For 1925-26 additional assessments were made on the respondent as trustee for Jennie Willmer in respect of (a) income from foreign possessions and (b) income from foreign securities. Appeals were lodged against the said additional assessments. At the hearing of the said appeals before the Special Commissioners it was not contended on behalf of the Crown that the respondent was liable as trustee for Jennie Willmer in respect of income from foreign securities, but it was contended that she was so liable in respect of the full amount of remittances from foreign possessions received in the United Kingdom. Evidence was given that, according to the law of New Jersey, Jennie Willmer's right under the will was the right to such a sum as was required for her maintenance and no more, except that, if, in any year, the income was insufficient, she was entitled to have recourse to capital but that she had no right to any specific stocks and shares but only the right against the trustees to have the trust reasonably administered. The Special Commissioners who heard the appeal held that the assessment on the respondent as trustee for Jennie Willmer could only cover income expended on the maintenance of Jennie Willmer and, as it was agreed that the full liability for the year on that had been covered by the original assessment, they discharged the additional assessment.

The assessments for 1926-27 which were the subject of the present appeal were made on the respondent as trustee under the will of Harriette Willmer on the basis that she was liable in respect of income arising from foreign securities forming part of the trust fund and in respect of remittances from foreign possessions forming part of the trust fund, subject, however, to an allowance in respect of the amount assessed on the respondent as trustee for Jennie Willmer as aforesaid.

[1935]		449
2 K.B.	KELLY v. ROGERS. (C.A.)

The assessments in question were made in March, 1933, by the Commissioners for the Sevenoaks division of the county of Kent, in which division the respondent resided during the year of assessment 1926-27 and until October, 1932. While in Kent, the respondent lived with her husband in a house owned by the respondent. On October 4, 1932, the respondent left Kent permanently, and since that date she had resided only at Sidmouth in the county of Devon with her husband in a house owned by him.

It was contended by counsel for the respondent: (a) that Mrs. Rogers, as trustee for an incapacitated person, was liable to be assessed to income tax only to the same extent as that person would be so liable were that person not incapacitated; (b) that the incapacitated person in this case, namely, Jennie Willmer, was liable to be assessed to income tax only on the amounts remitted to the United Kingdom for her maintenance and support, and on these sums income tax had already been paid; (c) that Mrs. Rogers as trustee was not liable to be assessed to income tax on the whole of the income arising from the trust fund in America whether remitted or not, merely because she resided in the United Kingdom: Williams v. Singer (1); (d) that in March, 1933, the Commissioners for the division of Sevenoaks had no jurisdiction to make assessments on the respondent, for the reason that the respondent was no longer resident in their division; and that the assessments should be discharged.

On behalf of the Crown it was contended: (a) that the respondent as trustee under the will of Harriette Willmer was in receipt and control of the income of the trust fund not expended for the maintenance of Jennie Willmer; that she was resident in the United Kingdom and was, therefore, liable under Case IV. and Case V. in respect of the income from the trust fund, subject to an allowance in respect of the amount of the assessment made on her as trustee for Jennie Willmer; (b) alternatively, that the respondent was liable under Case V. in respect of the remittances from the trust fund subject to the aforesaid allowance; (c) that the respondent

(1) [1921] 1 A. C. 65.

[1935]		450
2 K.B.	KELLY v. ROGERS. (C.A.)

had not, by ceasing to reside in Kent, ceased to be within the jurisdiction of the Commissioners for the Sevenoaks division for the purposes of assessment for the year 1926-27.

The Commissioners decided in favour of the first contention made on behalf of the Crown, but held that, in March, 1933, at which time the respondent was ordinarily residing at Sidmouth and nowhere else, the Sevenoaks Commissioners had no jurisdiction to make the assessments under appeal. They therefore discharged the assessments.

The Crown appealed.

Sir Thomas Inskip A.-G. and R. P. Hills for the appellant.

Raymond Needham K.C. and Terence Donovan for the respondent.

FINLAY J. This case, no doubt, raises points of importance. I have arrived at the conclusion that the decision of the Special Commissioners was wrong, although I agree with their view on the main point which was discussed before me.

There are two points in the case. One is a point as to taxability. The other is purely technical, but no doubt of importance. It is whether the Commissioners who made the assessment appealed against could make that assessment.

With regard to the point whether the assessment can be supported, Mr. Needham called my attention to r. 4 of the All Schedules Rules under the Income Tax Act, 1918. That rule is as follows: "The trustee, guardian, tutor, curator, or committee of any incapacitated person having the direction, control, or management of the property or concern of any such person, whether such person resides in the United Kingdom or not, shall be assessable and chargeable to tax in like manner and to the like amount as that person would be assessed and charged if he were not an incapacitated person." The substance of Mr. Needham's argument was that that rule specified (a) a special and exceptional case in which trustees are to be assessed, and (b) the measure of their assessability, outside which there is no

[1935]		451
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

liability on trustees to be assessed. I do not think that that argument is right. In my opinion, it is inconsistent with the view which was taken by Lord Cave in Williams v. Singer (1), where, after dealing with two sections, he said: "And even apart from these special provisions I am not prepared to deny that there are many cases in which a trustee in receipt of trust income may be chargeable with the tax upon such income. For instance, a trustee carrying on a trade for the benefit of creditors or beneficiaries, a trustee for charitable purposes, or a trustee who is under an obligation to apply the trust income in satisfaction of charges or to accumulate it for future distribution, appears to come within this category; and other similar cases may be imagined. The fact is that if the Income Tax Acts are examined, it will be found that the person charged with the tax is neither the trustee nor the beneficiary as such, but the person in actual receipt and control of the income which it is sought to reach. The object of the Acts is to secure for the State a proportion of the profits chargeable, and this end is attained (speaking generally) by the simple and effective expedient of taxing the profits where they are found. If the beneficiary receives them he is liable to be assessed upon them. If the trustee receives and controls them, he is primarily so liable." That lays down a general principle and I see no reason at all for restricting it to English income, or to income which arises in this country, or which arises under an English trust, or anything of that sort. The same principle, I think, was laid down in the Scottish case Reid's Trustees v. Commissioners of Inland Revenue. (2)

In the present case the beneficiary, Miss Willmer, who unfortunately suffers under a disability, is not, as such, entitled to the income. All she can do is, if necessary, to go to a Court and get appropriate directions given to the trustee. But, subject to that, the income in a real sense is the income of the trustee and indeed cannot, strictly speaking, qua income be said to be the income of anybody else. That appears, as the result of the explanation given in Baker v.

(1) [1921] 1 A. C. 65, 72.

(2) (1929) 14 Tax Cas. 512.

[1935]		452
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

Archer-Shee (1) and Archer-Shee v. Garland (2) to be the position here. The respondent, as the trustee, married to an Englishman and residing in England, is in fact in control of the income. It is quite true that it is not her own personal income. I suppose that, in so far as it is not required for the maintenance of the lady under the disability, it would be accumulated. None the less it is, as I think, the income of the respondent as trustee for the present purpose. When one appreciates that this is income of the trustee, the matter becomes clear. Applying, as I do apply, the general principle laid down by Lord Cave in Williams v. Singer (3) I think that the respondent is liable to taxation, because as a trustee she has control of the income. On this, the main point in the case, therefore, I find myself in agreement with the Special Commissioners.

It now becomes necessary to go on and deal with the point on which I differ from the Special Commissioners. That is, as I indicated earlier, a pure technicality. I am always reluctant to give effect to a technicality, because, if there is a liability to taxation, it is unfortunate if the tax cannot be levied for some such reason as that the commissioners of one district have made the assessment, whereas the commissioners of another district ought to have made it. But the taxation authorities have got to collect tax in accordance with the directions of the Acts, and accordingly I must see whether that has been done here.

The respondent quite clearly was resident in the Sevenoaks division in the year 1926-27, the year in respect of which the assessments appealed against were made by the commissioners for that division. I do not think it matters, but, in fact, she was resident there for some years afterwards, for it was not until October, 1932, that she left Kent and went to reside in Devon. In these circumstances the question arises whether the assessment can properly be made by the commissioners for the Sevenoaks division. The matter depends mainly on the proper construction of r. 4 of the

(1) [1927] A. C. 844.

(2) [1931] A. C. 212.

(3) [1921] 1 A. C. 65.

[1935]		453
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

Miscellaneous Rules applicable to Sch. D - mainly, but not entirely, because in argument a very large number of sections were brought to my attention. Rule 4 deals with several different classes. It deals, first, with a person engaged in a trade, profession, employment or vocation, and it says where he is to be charged. It deals, secondly, with a person who is a householder and not engaged in trade. It does not matter under which head the respondent comes, but I think she probably comes under that second head, as, apparently, she owned the house in which she and her husband were living. The third head refers to a person not engaged in trade with two or more places of residence, and then, fourthly, there is a person who is neither a householder nor engaged in trade, and he is to be assessed where he ordinarily resides. The fifth and sixth sub-rules are important. Sub-r. 5 provides: "Every other person not hereinbefore described shall be assessable and chargeable in the parish where he resides at the time of the issue of the general notices under this Act, or where he first comes to reside after the time of the issue of those general notices." Then sub-r. 6: "Every assessment and charge made in pursuance of the above provisions shall be valid and effectual, notwithstanding the subsequent removal of the person from the parish in which he is assessed or charged." Sub-r. 5 is important, not because the present case falls within it, but because it shows that a particular sort of person is assessable and chargeable in the parish where he resides at the time of the issue of the general notices under the Act. It would be a remarkable result if a person falling within that special category was assessable according to his residence at the time when the general notices under the Act were issued, while other persons, although resident in the district of assessment at that time, were not to be assessable if they happened to move. Sub-r. 6 was relied on by both sides. I think that, properly understood, it supports the argument of the Attorney-General. The wording is a little peculiar. In my view, while it certainly has reference to all the cases set forth in r. 4 the wording of the sub-rule may possibly be to some extent influenced by the sub-rule which immediately

[1935]		454
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

precedes it. The whole matter depends on the meaning of the words "the subsequent removal."

It was pointed out, and I think rightly, by the Attorney-General, and by Mr. Hills, that, if that referred to a removal after the whole process had been completed, it was entirely unnecessary. I think the meaning of the sub-rule is that the assessment and charge is to be valid and effectual notwithstanding that, after the issue of the general notices, but before the assessment is complete, the person removes. The true effect of sub-rr. 5 and 6 is to create what one may perhaps call the status of taxability by residence in the parish or place when the general notices are issued, and to provide that once a person has got that status of taxability, no subsequent removal from the district will affect it.

That really is sufficient to decide the point, but my attention was called to a good many other sections. I do not propose to go through them, but they seem to me generally to support the argument of the Crown and to show that assessment is local and nothing else. I may mention s. 125 of the Income Tax Act, 1918, which relates to additional assessments, and I myself attach considerable importance to a section to which the Attorney-General called my attention, s. 107, which relates to penalties for neglect to deliver lists. That section provides: "(1) A person who neglects or refuses to deliver, within the time limited in any general or particular notice, or wilfully makes delay in delivering a true and correct list, declaration, or statement, which he is required under this Act to deliver, shall - (a) if proceeded against before the general commissioners, forfeit a sum not exceeding twenty pounds and treble the tax which he ought to be charged under this Act .... " Sub-s. 2 provides: "The commissioners shall also proceed to assess or cause to be assessed every such person who makes default as aforesaid." In the present case I cannot doubt that the respondent, having made default, as I suppose technically she did, in preparing a full and proper declaration, might have been proceeded against before the Sevenoaks commissioners. The sub-section expressly says that "the commissioners" - which must, of course, mean those

[1935]		455
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

commissioners - "shall .... proceed to assess" her. That is the only section of the many cited to which I wish to refer. It does seem to me to afford strong support to the view which I take, that view being that once this status of taxability is created, then throughout there is a liability to be assessed by the commissioners of the place where that status has arisen, subject, of course, to the time limit imposed by the statute. The other sections which have been referred to appear to me to fit in perfectly well with that.

One argument was urged which I think I ought to notice, because it has reference to a decision of my own in Johnstone v. Chamberlain (1), where I was under some disadvantage, because the case for the appellant was argued only by the appellant in person, and I had not the advantage, therefore, of having the somewhat technical matters which arose dealt with by counsel. I do not think that what I am now deciding - that the commissioners of Sevenoaks had jurisdiction to deal with this case - conflicts in any way with what I there decided. In Johnstone v. Chamberlain (1) the person assessed had moved from one district to the other. The surveyor in the district to which he had moved discovered, or thought he had discovered, something, and a fresh assessment was made. I held, having heard the case really argued only on one side, that that assessment was in order. I should have been prepared in the special circumstances to reconsider that if I thought it needed reconsideration, but, in truth, when the decision in Kensington Income Tax Commissioners v. Aramayo (2) is examined, and when, in particular, s. 32 of the Finance (No. 2) Act, 1915 - passed no doubt to deal with the situation created by that case - is considered, I am not prepared to say that my decision there was wrong, or was in any way inconsistent with the decision which I am now giving. I say no more than that in some cases, it may be, two sets of commissioners have jurisdiction. I express no final opinion about that, but what I do say, having considered the matter fully in the light of the argument, is that, in my opinion, in the present case, the Sevenoaks commissioners, within whose district the

(1) (1933) 17 Tax Cas. 706.

(2) [1916] 1 A. C. 215.

[1935]		456
2 K.B.	KELLY v. ROGERS. (C.A.)	Finlay J.

respondent resided during the whole of the year of assessment, 1926-27, had jurisdiction to make the assessments appealed against. They clearly, in the first instance, had jurisdiction to assess her to any sum they thought proper, and I cannot see anything in her subsequent removal, or in any of the subsequent facts, which in any way ousts their jurisdiction. Therefore, without going further into the question whether any other commissioners could have had jurisdiction, it is sufficient for the decision of this case to say that, in my opinion, the Sevenoaks commissioners, on the proper construction of r. 4, and indeed upon a survey of the whole Act, had jurisdiction. It, therefore, follows that the appeal will be allowed with costs.

Appeal allowed.

G. F. L. B.

The respondent appealed. The appeal was heard on July 8 and 9, 1935.

Raymond Needham K.C., J. M. Tucker K.C. and Terence Donovan for the appellant.

Sir Thomas Inskip A.-G. and R. P. Hills for the Crown.

LORD HANWORTH M.R. This appeal fails. Really, if I had my own way, I should say no more than that I agree with the judgment of Finlay J.; but I do not think that would be quite courteous to the strenuous argument which we have had presented to us by Mr. Needham and by Mr. Tucker.

We have to deal with a case in which there has been an assessment made upon a person who is a trustee for the year 1926-27. At that time the trustee was resident in the county of Kent. Reading the Case, para. 9 says: "The assessments for 1926-27 which were the subject of the present appeal were made on the respondent as trustee under the will of Harriette Willmer on the basis that she was liable in respect of income arising from foreign securities forming part of the trust fund and in respect of remittances from foreign possessions forming part of the trust fund subject

[1935]		457
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

however to an allowance in respect of the amount assessed on the respondent as trustee for Jennie Willmer as aforesaid." As a matter of fact, the mother of the trustee, who was an American citizen, lived and died in New Jersey. She died in 1910. Her will was dated December 18, 1907, and she left three daughters, one of whom had to be taken care of - that is Jennie Willmer. It is also the fact that the present trustee, who is the sole trustee under the will, is Mrs. Rogers, and she takes care of her sister, Jennie Willmer. Jennie Willmer is interested up to a certain point under the will, her mother having made provision for her; but when she dies and provision no longer has to be made for her, then, in respect of sums which have been accumulating and have not been paid for her advantage, there is to be a trust which will come into being upon her death, but which at present it is not possible accurately to foretell or forecast. The money that has come to Mrs. Rogers as trustee is money which is derived from foreign possessions and foreign securities. It will be remembered that the taxation of foreign securities falls within Case IV. of Sch. D and that the foreign possessions fall within Case V. of Sch. D - Case V. dealing in part with securities and in part with foreign possessions. But the money that has come into the hands of the trustee is in her hands, she being resident over here and making use of some of the money for the maintenance of her sister Jennie and accumulating the rest. Under s. 112 of the Act the authorities have made what I will venture to call a token assessment upon the trustee in respect of these moneys which she has received and in respect of which she is trustee. Sect. 112 provides: "If the assessor does not receive a statement from a person liable to be charged to tax, he shall to the best of his information and judgment - (a) make an assessment upon that person of the amount at which he ought to be charged under Schedules A, B, and E; and (b) estimate the amount at which that person ought to be charged under Schedule D, and make a return to the commissioners of the name and address of that person and of any other particulars which the commissioners may require.

[1935]		458
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

As a matter of fact, the Commissioners dealing with the area of Sevenoaks, in the county of Kent, have made an assessment upon Mrs. Rogers, the present appellant, in respect of two sums estimated as being 1600l., which is in respect of foreign possessions, and another and separate 1600l. income from foreign securities. The assessments in question were made in March of 1933 by the Commissioners for the Sevenoaks division of the county of Kent, in which division the appellant resided during the year of assessment, 1926-27, and until October of 1932. On October 4, 1932, the appellant left Kent permanently, and since that date she has resided, and still resides, only at Sidmouth, in the county of Devon. It was contended by counsel for the appellant that she was not liable to be assessed and that the Commissioners for the division of Sevenoaks had no jurisdiction to make assessments upon her for the reason that the appellant was no longer resident in that division, and that the assessments should be discharged. The Commissioners came to the conclusion that in March, 1933, at which time she was residing at Sidmouth and nowhere else, the Commissioners for Sevenoaks had no jurisdiction to make the assessments and they discharged the assessments. Finlay J. did not agree with that view and he imposed the assessments.

I will deal first with the question of jurisdiction. It is quite obvious that from time to time persons must move about, and one has to see whether any machinery has been provided by the Income Tax Acts during their long course from 1842 onwards to meet the case of persons who have moved from one area to another. It must be remembered that the duty in respect of income tax is imposed upon the taxpayer himself or herself. Under s. 98 of the Act the assessors appointed to execute the Act have to give general notices; and the person who is chargeable under the Act, whose name is included in the general notice, has to prepare and deliver to the assessors a true and correct statement of the amount of the profits or gains arising to him from each and every source chargeable according to the

[1935]		459
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

respective Schedules. When he has done that it is the duty of the successive authorities up to the additional Commissioners to make an assessment. Sect. 121 provides that statements of profits or gains are to be laid before the additional Commissioners; and, by sub-s. 2, "Within a reasonable time after the surveyor has examined the statements, the additional commissioners shall appoint meetings for the consideration of all such statements as are then, or from time to time, delivered to them," and by sub-s. (3) "If - (a) the additional commissioners are satisfied that a statement has been bonâ fide made in accordance with this Act, and so as to enable them to assess the person with the full tax which ought to be charged; and (b) no information is given to the additional commissioners as to the insufficiency of the statement, and the surveyor makes no objection thereto, which he is hereby authorised to make for sufficient cause, the additional commissioners shall direct an assessment to be made in accordance with the statement." That assessment goes before the general Commissioners, and when the general Commissioners have passed it it becomes effective as a charge. Sect. 122, sub-s. 3, provides: "The assessments under Schedule D, certified and delivered by the additional commissioners to the general commissioners shall be allowed and confirmed by the general commissioners after the time for hearing appeals against such assessments has expired." There are obviously other matters which must be considered: for instance, it may be necessary to make an additional assessment, because after that assessment has been made so far it may be discovered that there are facts which justify a further charge being made upon the subject. Sect. 125 provides that if the surveyor discovers (putting it shortly) that there is a further sum which has not been within the first assessment then, "where the tax is chargeable under Schedule D, the additional Commissioners shall make an assessment, on the person chargeable, in an additional first assessment, in such a sum as, according to their judgment, ought to be charged, and any such assessment shall be subject to objection by the surveyor, and to appeal." There is also a provision under which, if

[1935]		460
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

a person goes to a new place of residence, more machinery is provided. Sect. 102, sub-s. 1, says: "If any person shall come into a parish in which he has not been charged to tax, the assessor, collector, or surveyor may give him notice in writing to deliver, within fourteen days from the giving of the notice - (a) a declaration in writing, signed by him, specifying the parish and county in which he has been assessed; or (b) in default thereof, a statement in order that he may be assessed and charged in the parish into which he has come." Then there is a penalty if he refuses to deliver it. Sub-s. 3 is: "If in any case a person who is, or who resides, in any parish has not been assessed therein, the commissioners acting for the parish may assess him, as though he had been resident there at the time of the publication of the general notices directed by this Act, unless he proves to their satisfaction that he has been duly assessed in some other parish."

I think the Attorney-General is right in saying that the character of taxability attaches as soon as there has been the general notice given which imposes under s. 100 a duty upon the subject to make his return: that has to be made no doubt in the place where he resides or, it may be, in the place where he carries on business, but it is the duty of the subject to assist the authorities to collect the tax, and when a man has left and gone to another place it does not vacate all that has been done so far in the first place of residence, for I think s. 102, sub-s. 3, indicates that the original proceedings against him, with a view to his being charged to tax, stand good, and that he would be liable to tax in the new place as though he had been resident there at the time of the publication of the general notices, unless he proved to the satisfaction of the authorities that he had been duly assessed in some other parish. More than that, his convenience is met this way. If he requires the matter to be dealt with by the Commissioners who deal with the parish or place to which he has gone, then he may give a notice under s. 136, sub-s. 4, that he would like the case to be dealt with by the Commissioners where he has gone to reside, just as he has a choice under s. 148

[1935]		461
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

to bring his appeal not before the general Commissioners but the Special Commissioners, if he so desires. Sect. 136, sub-s. 4 (a) says: "On the application of any person who has been assessed, and who has removed from the division in which the assessment was made, without having appealed in that division, the Commissioners of Inland Revenue may, if they think fit, authorise the commissioners of the division to which that person has removed to hear and determine his appeal against the assessment, and those commissioners shall proceed accordingly."

It is said against the reasoning founded on these Rules that one has overlooked the effect of the Miscellaneous Rules applicable to Schedule D. Under r. 4, provision is made as to where the person is to be assessed; either where the trade, profession or employment is carried on or where he ordinarily resides, and so on. Then when we come to sub-r. 6 of r. 4 we find this: "Every assessment and charge made in pursuance of the above provisions shall be valid and effectual, notwithstanding the subsequent removal of the person from the parish in which he is assessed or charged." As Lord Wrenbury has pointed out in Kensington Income Tax Commissioners v. Aramayo (1), these words "assessed" and "charged" are used with very different significance: sometimes the word "assessed" is used as having imposed a liability; sometimes it is only taking a step with a view to ultimate liability; and the word "charged" is also used in different places with a different significance. But it appears to me that this sub-rule clearly indicates: "Every assessment" (that is one of the initial stages) "and charge" (which is a later stage) "made in pursuance of the above provisions shall be valid and effectual, notwithstanding the subsequent removal of the person from the parish in which he is assessed or charged." Whether, therefore, the assessment has not ripened into what may be called a charge or whether there has been a charge made, but, as I still think, a charge in respect of which there could be a notice of appeal - whether or not those are the conditions, in either event

(1) [1916] 1 A. C. 215, 226.

[1935]		462
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

the subsequent removal of the person from the place where the assessment or charge has been made does not in any way invalidate the steps that have so far been taken. It appears to me that in the present case the assessments that were made in March, 1933, and in respect of a liability which arose during the time of the residence in Sevenoaks, stand good, although the appellant left in October of 1932. During all the initial stages the Commissioners for the county of Kent had authority, and their authority is not in any way invalidated by the fact that she subsequently removed.

I therefore come to the conclusion that, upon what Finlay J. calls the technical question, there is no ground for accepting the view which commended itself to the Commissioners - namely, that there was no jurisdiction to make this assessment.

I now come to the substance of the matter, which needs, I think, a little more consideration. This person is a trustee, who receives certain sums over here in respect of foreign possessions and foreign securities. In respect of a certain portion of them it is possible to define the ultimate destination of them - namely, in favour of the beneficiary, Miss Willmer. Still these sums are received at the present time and are being held by the trustee for purposes which shall be ultimately determined. Rule 1 of the Miscellaneous Rules applicable to Schedule D provides: "Tax under this Schedule shall be charged on and paid by the persons or bodies of persons receiving or entitled to the income in respect of which tax under this Schedule is hereinbefore directed to be charged." Rule 4 of the Rules applicable to All Schedules says: "The trustee, guardian, tutor, curator, or committee of any incapacitated person having the direction, control, or management of the property or concern of any such person, whether such person resides in the United Kingdom or not, shall be assessable and chargeable to tax in like manner and to the like amount as that person would be assessed and charged if he were not an incapacitated person." That clearly indicates that the person who is, prima facie, to be taxed, and taxed in respect of the beneficiary, is the trustee who is ultimately going to make the remittance or to lay

[1935]		463
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

out the money to the advantage of the beneficiary. I do not desire to say more upon this than that in Williams v. Singer (1), Lord Cave, while rejecting the argument of Mr. Cunliffe (as he then was) that when funds are vested in trustees the Revenue authorities are entitled to look to those trustees for the tax and are neither bound nor entitled to look beyond the legal ownership - while rejecting that doctrine, still said that the trustee is made chargeable with the tax, and the statutes recognize the fact that he is a trustee or agent for others, and he is taxed on behalf of and as representing his beneficiaries or principals, with the result that, to the extent to which he can indicate that a tax ought not to be paid by reason of the fact that the ultimate enjoyment is by a beneficiary, he would not be subject to tax, but can excuse himself. I think the matter is well put and summarized by Lord Clyde in his judgment in Reid's Trustees v. Commissioners of Inland Revenue (2), where he says: "The conclusion on the whole matter seems to be that trustees, albeit only the representatives of ulterior beneficial interests, are assessable generally in respect of the trust income under Rule 1 of the Miscellaneous Rules applicable to Schedule D; but that - just because they represent those beneficial interests - they may have a good answer to a particular assessment, as regards some share or part of the income assessed, on the ground that such share or part arises or accrues, beneficially to a cestui que trust in whose hands it is not liable to income tax, e.g., a foreigner under Case V., Rules 1 and 3. The fact that most trust income is subject to deduction of income tax at the source has probably obscured the specialty which attaches to the representative character of trustees as payers of income tax; but if the proposition now maintained for the trustees is a sound one it is incomprehensible that it should never have been advanced with regard to the very large sums of trust income which do not, and never can, reach the hands of an income-beneficiary." I think Lord Clyde there rightly expressed what is the result, and I desire respectfully to adopt those words as my own.

(1) [1921] 1 A. C. 65, 71.

(2) 14 Tax Cas. 512, 525.

[1935]		464
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

I only add one word about the Aramayo case (1): I have kept that bonne bouche to the last. That case is, to my mind, of no service at all at the present time, except this, that Lord Wrenbury, with great diligence, has gone through the various steps whereby under the general course of the Income Tax Acts they are put into force and persons are made liable. He goes through the steps of the notices, the liability upon the subject, the steps to be taken by the surveyor, by the additional Commissioners, and ultimately by the general Commissioners. All that historical matter is very helpful, when one comes to the decision. The decision was this. The subject-matter in respect of which the trader was sought to be taxed was derived from foreign possessions which fell within the terms of s. 108 of the Income Tax Act of 1842, and that provided a particular method of dealing with it. It said that, "The duty to be assessed .... in respect of the profits or gains arising from foreign possessions or foreign securities, or in the British plantations in America, or in any other of Her Majesty's dominions, may be stated to and assessed by the respective Commissioners acting for the respective places hereinafter mentioned, videlicet, London, Bristol, Liverpool, and Glasgow, according to the regulations hereinafter mentioned." What was said was that where you condescend to the particular you cut down the general - a well known principle - with the result that s. 108 cut down the general principles which are contained in s. 106. That was a decision upon those two sections, with the result that a prohibition went to the Commissioners of Kensington, who were told that under the law as it then stood the duty ought to be exacted and paid in the City of London and was not a matter which formed part of the duty of the Kensington Commissioners to collect. That was the real decision in the case, and the prohibition went. So far as the decision goes, so far as the precision of s. 108 stood, that has all gone, for by s. 32 of the Finance (No. 2) Act, 1915, s. 108, is repealed and now the place for assessment of income tax is provided as being this: "a person may be

(1) [1916] 1 A. C. 215.

[1935]		465
2 K.B.	KELLY v. ROGERS. (C.A.)	Lord Hanworth M.R.

charged to income tax .... whether or not he is engaged in any trade, manufacture, adventure, or concern, or any employment, vocation, or office, by Commissioners acting for any parish or place in which that person ordinarily resides; and if any person has been so charged before the commencement of this Act, the charge shall not be deemed invalid by reason of that person not having been charged by the right Commissioners" - with the result that now there is the full alternative, which is contained in the Miscellaneous Rules applicable to Schedule D, under the Act of 1918, which give the alternative places where a man can be taxed and which in effect carry out the system of the Income Tax Acts to which s. 32 of the Act of 1915 had been superadded. I refer to r. 4 of the Miscellaneous Rules.

For these reasons, in addition to those which have been given by Finlay J., I think the appeal fails and must be dismissed with costs.

ROMER L.J. I agree. In my opinion the material time to be observed for the purposes of r. 4 of the Miscellaneous Rules applicable to Schedule D is the time when the administrative machinery of the year of assessment is first set into operation, that is to say, the time when the general notices are issued under the Act. I am further of opinion that the word "subsequent" in sub-r. 6 of that rule means subsequent to that date. I am further of opinion that under s. 125 an additional assessment can be made and must be made in the same place. It is true that under s. 102 an alternative is apparently given to the Crown to assess in a different place where the person liable to be assessed has moved from the parish in which he was ordinarily residing at the time of the issue of the notices and has gone to a new parish. In such cases there is an option given to the Crown to have him assessed in the new parish to which he has moved. It is true that that might result in certain cases in there being a double assessment, just as through some mistake or error there might be a double assessment under Sch. D in the case of a person who is carrying on a trade or business.

[1935]		466
2 K.B.	KELLY v. ROGERS. (C.A.)	Romer L.J.

It is possible that through some mistake he may be assessed in the parish where he carries on his trade and he may be assessed in the parish where he ordinarily resides, but in such cases of double assessment relief is afforded by s. 151 of the Act. I cannot agree with Mr. Tucker that any difficulty will ever be experienced in ascertaining which of the two assessments has been made by an error. To take the case of a double assessment having been made by reason of s. 102, a double assessment can only have been made by reason of the failure of the taxpayer to disclose to the authorities of the new parish to which he has moved the fact that he has already been assessed in the old parish. However that may be, in the present case there have not been two assessments; there has been one assessment made in the parish in which the appellant resided at the time when the notices were issued in respect of the year of assessment, 1926-27.

Upon the second point raised in the appeal I only wish to add this. A trustee in receipt of the income of a trust fund is the person, within the words of r. 1 of the Miscellaneous Rules applicable to Schedule D, who receives or is entitled to the income and prima facie he is the person who under that Rule has to be charged with tax on such income. But as was pointed out by Lord Cave in Williams v. Singer (1), "where a trustee or agent is made chargeable with the tax the statutes recognize the fact that he is a trustee or agent for others and he is taxed on behalf of and as representing his beneficiaries or principals." Where therefore a beneficiary can come and say: "Although the trustee is legally entitled to the income I am entitled in equity to receive that income or some definite part of it, and if I am entitled to that income or that part of it, as the case may be, at law I should not be liable to be taxed in respect of it," then of course the trustee is not chargeable because the beneficiary, on whose behalf and as representing whom the trustee is chargeable, is not himself chargeable. But where there is no such beneficiary, then the trustee remains chargeable; he is the only person who is in fact chargeable in such a case.

(1) [1921] 1 A. C. 65, 72.

[1935]		467
2 K.B.	KELLY v. ROGERS. (C.A.)	Romer L.J.

Now in the present case during the year of assessment the trust on which the income was held by this lady may be described as follows: it was a trust to pay Miss Jennie Willmer 400l. a year, and as regards the balance of the income the trust was to hold it for a class of persons who were not then ascertainable and are not even now ascertainable. That being so, if Miss Jennie Willmer had been resident out of this country the 400l. would not have been liable to tax; the trustee would not have been chargeable in respect of it. Inasmuch as she is resident in this country, and as in equity she is entitled to that 400l., the trustee is chargeable in respect of it. That is not disputed. As regards the balance of the income, there is no beneficiary who can say: "I am entitled in equity to the receipt of that income." That being so, the trustee remains liable and chargeable and she appears to me to be the only person who could in those circumstances be chargeable with the tax in respect of it. I ventured to suggest to Mr. Tucker in the course of his argument the case of a trustee who receives income from which there has been no deduction at the source, whose trust it is to accumulate the income for a class of beneficiaries that have not yet been ascertained or are even ascertainable. In such a case it seems clear that the trustee is the person chargeable to tax in respect of that income. If it were not so the Crown might be deprived for ever of the tax. The accumulations might go on long beyond the six years within which the Crown could make an additional assessment and the tax would be lost.

For these reasons, as well as those given by the Master of the Rolls, I agree that this appeal fails.

MAUGHAM L.J. I am of the same opinion, and, agreeing as I do with the judgment of Finlay J. and the reasons given for his decision, I only wish to make two observations. The first is with regard to the technical point. I am satisfied that on the true construction of s. 102, sub-s. 3, of the Income Tax Act, 1918, the words "if in any case a person who is, or who resides, in any parish has not been assessed therein"

[1935]		468
2 K.B.	KELLY v. ROGERS. (C.A.)	Maugham L.J.

refer to the case of a person with regard to whom the machinery of assessment has commenced but with regard to whom the complete rendering of that person liable to pay the tax has not been completed. I accordingly agree with what the learned judge said with regard to the construction of r. 4 of the Miscellaneous Rules applicable to Schedule D, and on that view there can be no doubt that the present assessment, which was made by the Commissioners for the Sevenoaks division of the county of Kent, apart from the question of liability, is perfectly correct.

The other observation I wish to make is on the question of substance. I take the view that the learned judge was right in basing his judgment on the speeches made by Lord Cave, Lord Wrenbury and Lord Phillimore in Williams v. Singer (1), and I only wish to point out that the present case is one where there is an implied direction for accumulation of the balance of the income, after the expenditure of such sums as are required for the maintenance of Miss Jennie Willmer, for the benefit of persons as to whom it is not and cannot at present be established that they are all residing abroad. It is a case in which Miss Jennie Willmer herself has an interest in the income which is being annually accumulated. What the result might be if the accumulations were purely for the benefit of a class of persons resident abroad and for the benefit of nobody else is a matter which does not arise for decision at the present time, and with regard to which I do not wish to express an opinion.

Appeal dismissed.

Solicitors for appellant: J. E. Walker & Co.

Solicitor for respondent: Solicitor of Inland Revenue.

(1) [1921] 1 A. C. 65.

W. I. C.