Mapp v Oram

For the purpose of restricting a parent’s child allowance under section 212(4) of the Income Tax Act 1952, a child’s “income” means income chargeable to United Kingdom income tax. Foreign earnings which are neither remitted to the United Kingdom nor otherwise chargeable therefore do not reduce the allowance.

This construction accords with the usual meaning of income in a taxing Act and provides a workable statutory method of calculation. The Schedule E expense rules cannot lawfully or analogically be applied to non-chargeable earnings. An apparent anomaly or broad legislative purpose cannot justify creating an unstated method for measuring such income.

The taxpayer claimed the full child allowance for his son, an undergraduate who temporarily taught in France to improve his French. The son received £150 during the relevant year, spent it entirely in France and remitted none of it to the United Kingdom. It was common ground that the earnings were not chargeable to United Kingdom income tax.

The General Commissioners allowed the full allowance, and Ungoed-Thomas J upheld their decision. The Court of Appeal, by a majority, held that non-chargeable earnings were “income” under section 212(4) of the Income Tax Act 1952, although necessary expenses were deductible under ordinary principles rather than the Schedule E rules. Both parties appealed.

The central issue was whether “income” in section 212(4) meant only income chargeable to United Kingdom tax and, if not, how the child’s net foreign earnings should be calculated.

1. The taxpayer’s appeal was allowed and the Crown’s appeal was dismissed unanimously. The judgment of Ungoed-Thomas J was restored. Per Lord Hodson, with Lord Diplock concurring, and consistently with the separate speeches of Viscount Dilhorne, Lord Upjohn and Lord Pearson, “income” in section 212(4) of the Income Tax Act 1952 means income chargeable to United Kingdom income tax. The son’s unremitted French earnings therefore did not reduce the child allowance.

2. Per Lord Hodson, the ordinary approach within the income tax legislation is that income means chargeable income. Where Parliament intends non-chargeable income to be included, it commonly uses express language identifying that income. Sections 227, 376 and 412 illustrated that drafting practice. The differing language governing child and dependent-relative allowances did not establish that the child’s income required a different measure.

3. Per Lord Hodson, Lord Upjohn and Lord Pearson, the taxpayer’s construction also supplied the only workable statutory calculation. Schedule E and paragraph 7 of Schedule 9 applied to taxable employment income and could not lawfully govern the foreign earnings. If section 212(4) embraced non-chargeable receipts, the Act supplied no rules identifying permissible deductions. The courts could not create a new regime based on accountancy, common sense or an analogy with Schedule E.

4. Per Lord Upjohn, anomalies or perceived hardship provide an unsafe basis for construing taxing legislation. The apparent advantage enjoyed where a child earns and spends income abroad could not control the statutory language. Lord Pearson similarly considered the policy argument weak and noted that foreign earnings might also be taxed abroad.

5. Lord Hodson considered that temporary employment earnings could fall within income to which a child was “entitled in his own right”, and approved the existing authorities supporting that reading. Lord Upjohn assumed the point without deciding it; Viscount Dilhorne and Lord Pearson also reserved a concluded view because it had not been argued. It was therefore unnecessary to determine whether the expression was confined to recurrent income from a continuing source.

1. House of Lords: The taxpayer’s appeal was allowed and the Crown’s appeal was dismissed unanimously. The Court of Appeal’s order was reversed, save as to costs, and the judgment of Ungoed-Thomas J was restored: [1970] AC 362.
2. Court of Appeal: By a majority, Salmon and Fenton Atkinson LJJ, Danckwerts LJ dissenting, held that section 212(4) included income outside the United Kingdom tax charge. It rejected the Crown’s proposed use of the Schedule E expense rule by analogy and directed that necessary expenses be deducted under ordinary principles: [1969] 1 Ch 293.
3. High Court, Chancery Division: Ungoed-Thomas J dismissed the Crown’s appeal and upheld the Commissioners’ decision that “income” meant income chargeable to tax: [1969] 1 Ch 293.
4. General Commissioners: The taxpayer’s appeal was allowed, and the full child allowance of £165 was granted.