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M shall as from ist March 1956 be entitled to the
book debts, furniture, books, all documents and files,
office equipment, credits and effects of the said
partnership, including all money at the bankers to
the credit of the partnership subject to the claims
of clients in respect thereof." By clause 3 M agreed
to indemnify the taxpayer against such claims and
demands relating to the partnership. It was further
provided, by clause 4: "As from ist March, 1956, M
shall pay to the taxpayer for the period of 15 years
from such date one equal fourth part of the net
profits of the said practice computed before paying
any salary to M or his wife and shall furnish him
with a certified copy of the audited accounts of the
said practice in each year of the said period of 15
years". The clause continued to the effect that the
payments to the taxpayer were in consideration of
the taxpayer rendering assistance and advice to M
in connection with the practice during the period of
15 years and that M would be at liberty to consult
the taxpayer on any matter connected with the said
practice.
M paid the taxpayer £3,000 in the year 1961-62.
The inspector assessed the taxpayer under case VI
of Sch. D. on that sum on the basis that it was not
earned income within the definition in sect. 525 (i)
(a) or (b) of the Income Tax Act 1952. The General
Commissioners confirmed that assessment. The tax
payer appealed against the refusal of the inspector to
grant earned income tax relief, contending : (i) that
under the terms of the agreement with M he under
took to act as consultant solicitor; (2) that the
quantum of the advice and assistance required to be
given to him under clause 4 of the agreement was
to be decided by M ; and (3) that the amount payable
to him under the agreement was, within the meaning
of pars, (a) and (b) of Sect. 525 (i) of the Act of
1952, earned income as being remuneration from an
office or the emoluments of an office of profit.
The Crown contended that: (i) under the terms
of the agreement the taxpayer was laying down a
burden rather than assuming one; (2) the payment
under the agreement was made substantially in
respect of the taxpayer's share of goodwill and the
items in clause 2 ; (3) the relationship of M and the
taxpayer after the taxpayer retired from the partner
ship was not that of employer and employee;
(4) that the terms of clause 4 of the agreement did
not create any office or employment for the tax
payer ; (5) that the sum payable under the agreement
was not derived by the taxpayer from the carrying
on of any trade, profession or vocation ; (6) that the
sum was correctly assessed under Case VI of schedule
D ; (7) that the taxpayer had not ceased to hold any
office or employment such that the sum payable
under the agreement was an annuity pension or
annual payment to which Sect. 376 of the Act of
1952 applied; and (8) that the sum was not earned
income within the meaning of the Act.
Buckley J. dismissed the taxpayer's appeal. As he
read clause 4, the transfer to M. of the taxpayer's
share in the partnership was expressed to be "in
consideration of the agreement on the part of M
hereinafter contained." He refused to limit those
words exclusively to the covenant for indemnity
contained in clause 3. The judge rejected the con
tention that clause 4 was a self-contained clause
distinct and separate from the agreement. He con
sidered he had to construe the document as a whole
and that the transfer of the assets was made in con
sideration of everything that M agreed to do under
the agreement. M had agreed to indemnify the tax
payer, to pay the taxpayer a quarter of the profits and
in certain events to pay the taxpayer's widow an
annuity. Buckley J. felt that he was not entitled to
come to the conclusion that clause 4 should be
treated as though it was segregated from the rest
of the agreement. He regretfully reached the con
clusion that he must read the document as a whole
and treat these payments of a share of profit as being
made not only in consideration of such service as the
taxpayer might thereafter render to M but also in
consideration of the transfer of the taxpayer's share
of the assets of the partnership. Towards the end
of his judgment the learned judge said : "I reach this
conclusion with regret, because I strongly suspect
that, in fact, the parties did intend that the payment
of a share of the profits should be treated as between
them as being in consideration of the services to be
rendered by the taxpayer; but I must ascertain their
intention from the language they have used, and I
do not feel that I can escape from the effect of the
terms of clause 2 of the agreement."
The 1964 supplement to
the 3rd edition of
Encyclopaedia of Forms and Precedents (p. 709)
contains a clause which though somewhat verbose,
indicates the points which have to be covered.
The clause in such form in a deed of retirement
should enable the ex partner to claim relief in respect
of earned income.
(Hale v. Shea (Inspector of Taxes) (1965) i All
E.R. I55).
REGISTRATION OF TITLE ACTS,
1891 AND 1942
Issue of
New
Land Certificate
Applications
have
been
received
from
the
registered owners mentioned in the Schedule annexed
hereto, for the issue of Certificates of Title in sub.
21