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The High Court allows the Revenue's appeal in Norris v Edgson and another claim for relief for maintenance fails.
The taxpayer claimed tax relief on maintenance payments assessed by the Child Support Agency for the maintenance of his daughter. The Revenue's claim that the legislation prevented such relief in cases where the former had remarried was upheld by the court.
The facts
The taxpayer claimed tax relief on maintenance payments assessed by the Child Support Agency for the maintenance of his daughter. The Revenue's claim that the legislation prevented such relief in cases where the former had remarried was upheld by the court.
The facts
The High Court allows the Revenue's appeal in Norris v Edgson and another claim for relief for maintenance fails.
The taxpayer claimed tax relief on maintenance payments assessed by the Child Support Agency for the maintenance of his daughter. The Revenue's claim that the legislation prevented such relief in cases where the former had remarried was upheld by the court.
The facts
The taxpayer, Mr Edgson, and his then wife had a daughter in 1982. Two years later, Mr and Mrs Edgson divorced. Mrs Edgson later remarried, and was divorced again. In 1996, the Child Support Agency assessed the taxpayer to pay maintenance for the benefit of the daughter, payments being made to the Agency. In 1997, the taxpayer claimed income tax relief in respect of the maintenance payments under section 347B, Taxes Act 1988. Section 347B(1)(b)(ii) said that a qualifying maintenance payment meant a periodical payment made by one spouse 'to the other party for the maintenance by the other party of a child of the family'.
The Revenue refused the claim on the grounds that subsection (1)(c)(ii) 'the party to whom or for whose benefit the payment is made has not remarried' was not satisfied.
The taxpayer appealed to the General Commissioners who accepted his contention that the requirement in subsection (1)(c)(ii) was met as his former wife, although she had remarried, had also been divorced for a second time when the payments were made, and had not remarried a third time.
The Revenue therefore appealed to the High Court.
(Kate Selway for the Revenue; the taxpayer represented himself.)
The judgment in the High Court, Chancery Division
Mr Justice Park began his judgment saying that he felt some sympathy for Mr Edgson, and could understand why the General Commissioners found in his favour. However, he added that the Inspector's appeal had to succeed.
The point at issue was whether or not the taxpayer was entitled to the relatively small amount of tax relief under section 347B, Taxes Act 1988. The first relevant tax year was 1995-96, although there was nothing in the commissioners' appeal which actually stated this.
The judge referred to payments made under a court order (as opposed to as assessed by the Child Support Agency) saying that, had Mr Edgson's payments been made under a court order, they would have had to have been made by him either to or for the benefit of Mrs Edgson for her maintenance or to her for the maintenance by her of the daughter. Furthermore, the payments would have had to have been due at a time when Mr and Mrs Edgson were not a married couple, and when Mrs Edgson had not remarried. Otherwise they could not have qualified for tax relief.
The payments were made, however, as a result of an assessment by the Child Support Agency. Looking at subsection (1)(c)(ii), it referred specifically to the party not having remarried. Mrs Edgson had remarried when the taxpayer made the maintenance payments; she was indeed also divorced for the second time, but the legislation made no reference to the status of the remarriage. The 'other party' referred to in subsection (9) makes section 347B effective for payments made to the Child Support Agency where they are made to 'the party to whom or for whose benefit the payment is made is not remarried'. The other party could only be Mrs Edgson, as it would be nonsense for the law to refer to a payment being made to the couple's daughter for the maintenance by the daughter of the daughter.
The Commissioners had, on the other hand, accepted that the other party could be the daughter, and she could not have remarried. The judge said that on a correct analysis of the legislation, for the purpose of Child Support Agency payments, the other party had to be the other party to the marriage. She had remarried so relief was not due.
The judge sympathised with the taxpayer's plight, and said that while it was logical that a former husband should not receive tax relief on payments made to a former wife who was married to someone else, this logic seemed not to apply if the subsequent marriage failed too. However, the statute was unambiguous. He said that had Parliament 'thought the matter through comprehensively' it would probably have worded the legislation in a way that would have allowed tax relief to those in Mr Edgson's circumstances.
Decision for the Revenue
(Reported at [2000] STC 494.)
Commentary by Allison Plager
It seems impossible to disagree with the judge's reasoning that the Revenue's appeal had to succeed. However, it is unsatisfactory that in a case where quite plainly tax relief should be given, only bad draughtsmanship prevents it. One might have hoped that it would not be beyond the realms of possibility for the Revenue to allow relief in these situations, even if by way of (yet another) extra-statutory concession. The amount of tax relief due in most cases is likely to be insignificant but the hardship of the taxpayer might well be considerable given the splitting of resources after divorce. However, Tax Offices have been generally obstructive of claims for relief for maintenance claims in recent years, some expecting agreements to be in a deed or Court Order, and not simply in a written and signed statement, if tax relief is to be given.
Other failed cases where the precise letter of the law was not satisfied are Billingham v John [1998] STC 120 (payment for daughter not stated to be due to the ex-wife) and Otter v Andrews (SpC 181) (mortgage payments on ex-wife's house paid direct to building society).
The taxpayer claimed tax relief on maintenance payments assessed by the Child Support Agency for the maintenance of his daughter. The Revenue's claim that the legislation prevented such relief in cases where the former had remarried was upheld by the court.
The facts
The taxpayer, Mr Edgson, and his then wife had a daughter in 1982. Two years later, Mr and Mrs Edgson divorced. Mrs Edgson later remarried, and was divorced again. In 1996, the Child Support Agency assessed the taxpayer to pay maintenance for the benefit of the daughter, payments being made to the Agency. In 1997, the taxpayer claimed income tax relief in respect of the maintenance payments under section 347B, Taxes Act 1988. Section 347B(1)(b)(ii) said that a qualifying maintenance payment meant a periodical payment made by one spouse 'to the other party for the maintenance by the other party of a child of the family'.
The Revenue refused the claim on the grounds that subsection (1)(c)(ii) 'the party to whom or for whose benefit the payment is made has not remarried' was not satisfied.
The taxpayer appealed to the General Commissioners who accepted his contention that the requirement in subsection (1)(c)(ii) was met as his former wife, although she had remarried, had also been divorced for a second time when the payments were made, and had not remarried a third time.
The Revenue therefore appealed to the High Court.
(Kate Selway for the Revenue; the taxpayer represented himself.)
The judgment in the High Court, Chancery Division
Mr Justice Park began his judgment saying that he felt some sympathy for Mr Edgson, and could understand why the General Commissioners found in his favour. However, he added that the Inspector's appeal had to succeed.
The point at issue was whether or not the taxpayer was entitled to the relatively small amount of tax relief under section 347B, Taxes Act 1988. The first relevant tax year was 1995-96, although there was nothing in the commissioners' appeal which actually stated this.
The judge referred to payments made under a court order (as opposed to as assessed by the Child Support Agency) saying that, had Mr Edgson's payments been made under a court order, they would have had to have been made by him either to or for the benefit of Mrs Edgson for her maintenance or to her for the maintenance by her of the daughter. Furthermore, the payments would have had to have been due at a time when Mr and Mrs Edgson were not a married couple, and when Mrs Edgson had not remarried. Otherwise they could not have qualified for tax relief.
The payments were made, however, as a result of an assessment by the Child Support Agency. Looking at subsection (1)(c)(ii), it referred specifically to the party not having remarried. Mrs Edgson had remarried when the taxpayer made the maintenance payments; she was indeed also divorced for the second time, but the legislation made no reference to the status of the remarriage. The 'other party' referred to in subsection (9) makes section 347B effective for payments made to the Child Support Agency where they are made to 'the party to whom or for whose benefit the payment is made is not remarried'. The other party could only be Mrs Edgson, as it would be nonsense for the law to refer to a payment being made to the couple's daughter for the maintenance by the daughter of the daughter.
The Commissioners had, on the other hand, accepted that the other party could be the daughter, and she could not have remarried. The judge said that on a correct analysis of the legislation, for the purpose of Child Support Agency payments, the other party had to be the other party to the marriage. She had remarried so relief was not due.
The judge sympathised with the taxpayer's plight, and said that while it was logical that a former husband should not receive tax relief on payments made to a former wife who was married to someone else, this logic seemed not to apply if the subsequent marriage failed too. However, the statute was unambiguous. He said that had Parliament 'thought the matter through comprehensively' it would probably have worded the legislation in a way that would have allowed tax relief to those in Mr Edgson's circumstances.
Decision for the Revenue
(Reported at [2000] STC 494.)
Commentary by Allison Plager
It seems impossible to disagree with the judge's reasoning that the Revenue's appeal had to succeed. However, it is unsatisfactory that in a case where quite plainly tax relief should be given, only bad draughtsmanship prevents it. One might have hoped that it would not be beyond the realms of possibility for the Revenue to allow relief in these situations, even if by way of (yet another) extra-statutory concession. The amount of tax relief due in most cases is likely to be insignificant but the hardship of the taxpayer might well be considerable given the splitting of resources after divorce. However, Tax Offices have been generally obstructive of claims for relief for maintenance claims in recent years, some expecting agreements to be in a deed or Court Order, and not simply in a written and signed statement, if tax relief is to be given.
Other failed cases where the precise letter of the law was not satisfied are Billingham v John [1998] STC 120 (payment for daughter not stated to be due to the ex-wife) and Otter v Andrews (SpC 181) (mortgage payments on ex-wife's house paid direct to building society).
