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HMRC internal manual

Business Income Manual

Miscellaneous income: scope of the provisions: judicial comment

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

There have been many cases over the years on the scope of the miscellaneous income sweep-up provisions that underlie the guidance in BIM100101. You should be careful not to apply judicial commentary specific to particular facts to a substantially different fact pattern.

In his judgment in Leeming v Jones [1930] 15TC333 at page 359, Viscount Dunedin considered the scope of the miscellaneous income sweep-up provisions. He noted that it was the sweep up for all forms of income, not just income that falls short of being trading income. He went on to say that not all profits were caught:

‘The limitations of the words ‘profits and gains’ were pointed out by Lord Blackburn long ago in the case of the Attorney-General v Black, L.R. 6 Ex. 308, when he said that profits or gains [within the sweep-up provisions] must mean profits or gains ejusdem generis [i.e. of the same nature and kind] with the profits or gains specified in the [other Income Tax charging provisions]. And then there came the memorable and often quoted words of Lord Macnaghten in the London County Council case, when he begged to remind people that “income tax was a tax on income”.’

What Blackburn J said in Attorney-General v Black L.R. 6 Ex. 308 was that the words of what is now the sweep-up charging provision ‘are very extensive’. He went on to say:

‘Not, however, every kind of income derived by a corporation in whatever way it might come to them is included in it. They would not be liable except in respect of something of the same nature and kind … as income charged under another more specific heading … ‘

Rowlatt J considered the scope of the provisions in Ryall v Hoare [1923] 8TC521 at page 525. He set out what is outside the scope of the provisions:

‘One may rule out two classes of emoluments from this description. In the first place, it is quite clear that anything in the nature of a capital accretion is outside the words “profits or gains”, as used in these Acts; that, of course, follows from the scope of the Act, and it is sanctified by the usage now of a century. That rules out, of course, the well-known case of a casual profit made upon an isolated buying and selling of some article; that is a capital accretion, and unless it is merged with other similar transactions in the carrying on of a trade, and the trade is taxed, no tax is exigible in respect of a transaction of that kind. “Profits or gains” mean something which is in the nature of interest or fruit, as opposed to principal or tree. The other class of case that one can rule out is that of gifts. A person may have an emolument by reason of a gift … or he may acquire an emolument by finding an article of value or money, or he may acquire it by winning a bet. It seems to me that all that class of cases must be ruled out, because they are not profits or gains at all.’

He also set out what is within the provisions:

‘Without pretending to give an exhaustive definition, I think one may take it as clear that where an emolument is received, or, rather, where an emolument accrues, by virtue of some service rendered by way of action or permission, or both, at any rate that is included within the words “profits or gains”.’