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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Crooke v. Inland Revenue (Easson) [1920] ScotLR 560 (29 June 1920) URL: http://www.bailii.org/scot/cases/ScotCS/1920/57SLR0560.html Cite as: [1920] ScotLR 560, [1920] SLR 560 |
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Page: 560↓
[Exchequer Cause.
The business of portrait photography is not a profession within the meaning of the exception from liability to excess profits tax contained in section 39 ( c) of the Finance (No. 2) Act 1915 (5 and 6 Geo. V, cap. 89).
The Finance (No. 2) Act 1915 (5 and 6 Geo. V, cap. 89), Part III, beginning with section 38, deals with Excess Profits Duty. Section 39, enacts—“The trades and businesses to which this Part of this Act applies are all trades or businesses (whether continuously carried on or not) of any description carried on in the United Kingdom, or owned or carried on in any other place by persons ordinarily resident in the United Kingdom, excepting …( c) any profession the profits of which are dependent mainly on the personal qualifications of the person by whom the profession is carried on and in which no capital expenditure is required, or only capital expenditure of a comparatively small amount, …”
William Crooke, Edinburgh, appellant, being dissatisfied with a decision of the Commissioners for the General Purposes of the Income Tax Acts at Edinburgh, confirming an “assessment to excess profits duty made upon him on account of the profits arising from the business of photographer carried on by him at 103 Princes Street, Edinburgh, as follows—Accounting period 12 months to 30th June 1916, excess profits £240, duty £144; accounting period 12 months to 30th June 1917, excess profits £97, duty £68; accounting period 12 months to 30th June 1918, excess profits £208, duty £166”—as being erroneous in point of law, took a Case, in which the Surveyor of Taxes, on behalf of the Inland Revenue, was respondent.
The Case set forth—“The assessments were made under section 38 of the Finance (No. 2) Act 1915 (5 and 6 Geo. V, cap. 89), section 45 of the Finance Act 1916 (6 and 7 Geo. V, cap. 24), and section 20 of the Finance Act 1917 (7 and 8 Geo. V, cap. 31). Appeals against the assessments were intimated on the ground that the business was exempt from Excess Profits Duty under section 39 ( c) of the Finance (No. 2) Act 1915.
1. The following facts were admitted or proved—(1) Mr Crooke appears in the valuation roll for the year 1917–18 as the tenant of a studio at the address mentioned, at a yearly rental of £270. (2) The business carried on is the business of portrait photographer. (3) In all cases, unless Mr Crooke is absent from his studio, photographs are taken by himself personally. When he is away the customer is given the option of postponing until Mr Crooke is able to be present. (4) The accounts of the business for the three years to 30th June 1918 show, inter alia, as follows:—
Year to 30th June.
1916.
1917.
1918.
Wages paid
£791
£929
£956
Purchases and trade expenses
515
609
826
Valueof furniture and fittings at the end of the year
1411
1411
1411
Stock of frames, mounts, appliances &c.
827
789
853
(5) The capital employed in the business computed for Excess Profits Duty purposes
Page: 561↓
as shown by the accounts is as follows—As at 30th June 1916, £1850; as at 30th June 1917, £1984; as at 30th June 1918, £1874. 2. Mr D. W. Robb, solicitor, Edinburgh, on behalf of the appellant, contended—( a) That the appellant's business was a profession within the meaning of section 39 ( c) of the Finance (No. 2) Act 1915, and in respect that portrait photography for its successful execution requires qualities analogous to those of an artist. The appellant had the necessary and personal qualifications for conducting the business, and he himself was entirely responsible for the artistic part of the work. On his personal capacity and the personal reputation which it has gained for him, the success of the business entirely depended; it would deteriorate, and its profits would disappear or be largely diminished if the appellant with his personal qualifications should not continue to be engaged in taking the photographs. ( b) That the business was one in which no capital expenditure was required, or only capital expenditure of a comparatively small amount. Cameras and printing machinery were all that was requisite for the business; and the rent of the rooms, the decoration thereof, and a staff of assistants were extraneous to the business. The profits of the business resulted from the appellant's artistry and skill, and not from the amount of capital employed. It was conceded by the appellant that there might be photographic businesses which were not so personal in their nature, such, for example, as a business carried on by employees in various towns under one well-advertised name.
3. The Surveyor of Taxes (Mr A. Easson) contended—( a) That the business was not exempt from Excess Profits Duty under section 39 ( c) of the Finance (No. 2) Act 1915. ( b) That the business was not a profession. ( c) That the profits were mainly derived from the preparation and sale of an article in the production of which the services of assistants were largely used, ( d) That the dependence on the personal qualifications of the person by whom the business was carried on was no more than the similar dependence of the business of an ordinary merchant on the personal qualifications of the person buying and selling. ( e) That the capital expenditure was comparatively large. ( f) That the case was analogous to the purely business side of publishing a magazine— Commissioners of Inland Revenue v. Maxse, (1919) 35 T.L.R. 348, 120 L.T.R. 680. ( g) That the case was distinguishable from the case of The Commissioners of Inland Revenue v. North & Ingram, [1918] 2 K. B. 705.
4. The Commissioners, after due consideration of the facts and arguments submitted to them, refused the appeal.”
Argued for the appellant—The question in the case was more than a mere question of fact. The appellant's occupation fell within the exception contained in section 39 ( c) of the Finance (No. 2) Act 1915 (5 and 6 Geo. V, cap. 39). The appellant's occupation was a profession. The term “profession” had been gradually amplified and the appellant's occupation clearly fell within the definition of that term laid down by Scrutton, L. J., in Inland Revenue Commissioners v. Maxse, [1919], 1 K.B. 647, at p. 657. The appellant's profits could not be separated into professional and business profits—see argument of Sir E. Pollock in Inland Revenue Commissioners v. Maxse ( cit.), at 649. The really distinguishing point between the appellant's profession and a business was that the profits of his profession depended on his personal skill and aptitude. His was not a business involving sale or trade. There was enough in the case to indicate that the profits of the appellant's business were mainly dependent on his personal qualifications, and the capital expenditure was of a comparatively small amount— Inland Revenue Commissioners v. North & Ingram, [1918], 2 K.B. 705. The decision in Hugh Cecil v. Inland Revenue Commissioners, ( 1919), 36 T.L.R. 164, was too sweeping and accordingly was of doubtful authority.
Argued for the respondent— Prima facie the question in the case was a question of fact, and there was enough in the case to support the Commissioners' findings. The appellant's business was not a profession within the meaning of section 39 ( c) of the Finance (No. 2) Act 1915 ( cit. sup.), because (1) the taking of a photograph was a purely mechanical operation, which, while the skill and artistry Of the operator might command a higher price for the photograph, contained nothing which amounted to the element of professional skill required under the statute; (2) the capital employed in the appellant's business was not of a “comparatively small amount,” for it was almost £2000. In Hugh Cecil v. Inland Revenue Commissioners ( cit. sup.) the grounds of exception were much stronger than in the present case and yet the appellant was held liable to pay the tax. The ratio of the decision in Christopher Barker & Sons v. Inland Revenue Commissioners, [1919], 2 K.B. 222, applied to the present case. In Inland Revenue Commissioners v. Maxse ( cit. sup.) the appellant's skill as a journalist was the predominant feature.
The question here depends on the construction of the 39th section of Finance (No. 2) Act 1915. That section provides that with certain exceptions all trades or businesses carried on in the United Kingdom shall be subject to what is called excess profits duty. Included among the exceptions is “any profession the profits of which are dependent mainly on the personal qualifications of the person by whom the profession is carried on, and in which no capital expenditure is required, or only capital
Page: 562↓
Now Mr Crooke's energy is expended on what is a business—that of a portrait photographer. It is, however, contended that this business is a profession within the meaning of section 39 ( c) of the Act, and we are asked therefore to hold that it is within the exception provided in that section. Assuming that to be a question of law, I do not find in the case any facts stated that would enable us to determine it at all.
The point that is mainly relied upon is that Mr Crooke is a portrait photographer. I do not think that carries us any length at all. But the appellant seeks to make out a special case by saying that all his photographs are taken by himself personally, and that when he is away the customer is given the option of going away and coming back when he is present. We are not told whether the option is taken advantage of, and if so, to what extent. Even at the best it only comes to this, that Mr Crooke does nothing except what any and every photographer must do. He must pose his subject, he must arrange his camera, and he must seize the proper moment for closing the shutter. I have no doubt he does all these things very much better than the great bulk of photographers; but after all, every photographer has to do everything that Mr Crooke does, and he does it to the best of his ability—be that great or small. If, therefore, we decide this case in the way desired by the appellant we would simply be deciding that every photographic artist who takes portrait photographs, as a great many of them do, must fall within the exception. I am unable to reach such a conclusion purely on a construction of the statute and without a fuller knowledge of the facts. I find in this case no facts which distinguish Mr Crooke's position from that of other photographers so far as this statute is concerned.
The cases referred to other than that of Hugh Cecil, 36 T.L.R. 164, do not seem to me to have any bearing upon this question. In the case of Commissioners of Inland Revenue v. North and Ingram, [1918] 2 K.B. 705, the Court took the view that every schoolmaster is a professional man carrying on a profession. In the same way Mr Maxse, [1919] 1 K.B. 647, in so far as he got relief, was clearly a professional man carrying on a profession. In the case of Hugh Cecil v. Inland Revenue Commissioners, Mr Justice Rowlatt had before him the very point we have here to decide, with this great difference that the facts there were stated much more fully than they are in this case. I think it would be impossible for us, with a far more meagre statement of facts before us, to come to any other conclusion than that which was reached by Mr Justice Rowlatt in the case of Hugh Cecil. That judgment is not binding upon us, but the reasoning of Mr Justice Rowlatt seems to me to be sound, and I adopt it. Although my judgment mainly proceeds upon the very scanty disclosure of facts which we have got here, I cannot see how even a fuller disclosure of facts would have affected the result. I am of opinion that we cannot interfere with the judgment of the Commissioners, and that we should dismiss the appeal.
I cannot find in this case any evidence that this business is a profession within the meaning of section 39 of the Act of 1915. The appellant's counsel admitted that not all businesses of this kind can claim to be professions. They contended, however, that there was enough in the facts, admitted or proved, to warrant us in holding that this business came within the third exception. They founded on findings (2) and (3) of the findings in fact. The second finding, however, does not carry one any length, because, as your Lordship has said, most photographers of this class take portraits. The third shows that Mr Crooke is personally attentive to his business, but we are not told, and do not know in what way the option given to the customers is usually or universally exercised. I cannot think that these facts are enough to warrant us in reaching the desired conclusion. I say so without wishing in any way to disparage the artistic merits of Mr Crooke's photography.
One of the English judges in a case quoted observed that all professions are businesses, but that all businesses are not professions— Christopher Barker & Sons, [1919] 2 K.B. 222, Rowlatt J., at p. 228. I cannot think that the element of skill by itself can turn a business into a profession. The case of Hugh Cecil 36 T.L.R. 164, was founded on as a direct precedent in favour of the Crown. In that case evidence was actually led of the high artistic quality of the work in question, but still Mr Justice Rowlatt decided against the photographer. His decision of course is not binding upon us, but it seems to me, as at present advised, to be sound. I do not, however, proceed upon that judgment, but acting on my view of the statute and of the law on the facts which we have before us I am for refusing this appeal.
My difficulty in holding that Mr Crooke is exempt under this clause is that I do not think we can hold that he exercises a profession. I have great sympathy with the view which was expressed by his counsel, because one knows that there is all the difference in the world between artistic photography, especially portrait photography, and the common photography which is practised by anyone who can handle a camera. But if we were to hold
Page: 563↓
The Court dismissed the appeal and affirmed the determination of the Commissioners.
Counsel for the Appellant— Chree, K.C.— Graham Robertson. Agents— J. & J. Galletly, S.S.C.
Counsel for the Respondent—Lord Advocate ( Morison, K.C.)— Candlish Henderson. Agent— Stair A. Gillon, Solicitor of Inland Revenue.
