VI.

Hochstrasser ( Inspector of Taxes) v Mayes [1960] AC 376

Mayes was an employee of Imperial Chemical Industries Limited (ICIL). He was

required by the company to often move from one part of the country to the other.

Under the company housing scheme the company agreed that it would make up any

loss on the sale of a house by an employee when the employee was required to

relocate. Mayes did make such a loss of £350 and it was reimbursed by the company.

The House of Lords held unanimously that the reimbursement receipt was not gross income.

220 Moorhouse (Inspector of Taxes) v Dooland [1955] 1 Ch 284, at p 292 Evershed MR.

221 Moore v Griffiths (Inspector of Taxes) [1972] 3 All ER 399.

222 Refer to Laidler v Perry [1966] AC 16 at p 35. This case is discussed already in this paper at page

48 and Lord Hodson statement is cited there.

The arguments centered on whether or not the receipt was a product of Mayes‘

employment relationship with ICIL. Viscount Simonds quoted Parker LJ, who

presided in the Court of Appeal hearing of the case, as follows223

―Where you find that an employee has during the course of his employment

received a benefit in money or money's worth, that receipt is a profit of his

employment and taxable as such unless (1) it amounts to a gift to him in his personal

capacity, eg., a benefit conferred out of affection or pity; or (2) it has been received for

a consideration other than the giving of services‖.

The receipt could not be characterised as a personal gift given out of affection or

pity. In Hochstrasser v Mayes224 therefore the more important question was whether

Mayes had provided services rendered in return for the receipt. The court found that

Mayes‘ salary was commensurate with others in similar positions and thus he was
fully recompensed for the services he provided to the company. There was nothing

express or implicit in the agreement to suggest that the payment was a reward for his

services except the relationship of parties, which was not sufficient by itself to justify

holding the payments assessable. As with other cases examined here, it was accepted

that Mayes would not have received the money ―but for‖ his employment relationship,

but the ―money was not paid to him as wages and ―it was not profits from his employment.

In Hochstrasser v Mayes227 it was held that the employment must be

the causa causans of the payment and not merely the causa sine qua non. Lord

Radcliffe expressed this principle by saying that while it is not sufficient to render a

payment assessable that an employee would not have received it unless he had been an

employee, it is assessable if it had been paid to him in return for acting as or being an

employee.

223 Hochstrasser (Inspector of Taxes) v Mayes [1960] AC 376, at p 388.

224 Hochstrasser (Inspector of Taxes) v Mayes [1960] AC 376.

225 Hochstrasser (Inspector of Taxes) v Mayes [1960] AC 376, at p 392.

226 Ibid.

227 Hochstrasser (Inspector of Taxes) v Mayes [1960] AC 376.

228 Hochstrasser (Inspector of Taxes) v Mayes [1960] AC 376, at p 392.

65

The decision in Pritchard v Arundale229 affirmed the principles formulated in

Hochstrasser v Mayes230. In Pritchard the shares were given to Arundale under the

tripartite agreement in consideration of his undertaking employment with the company

and relinquishing his former career as a chartered accountant. The transfer of shares
took place before Arundale started working for the company. It was held that the

shares were not transferred ―in respect of or in relation‖ to taxpayers employment in

return for services. Consideration for the shares was the undertaking to serve the

company.