SE42460 - Emoluments from offices and employments: basis of assessment - assessments made after a change of practice - cases involving exemption from tax

Section 206 ICTA 1988 and Walters v Tickner (66TC174)

In the case of Walters v Tickner (66TC174), the Court of Appeal ruled that Section 206 ICTA 1988 did not apply to certain income which had suffered PAYE. The Special Commissioners had determined that the income was not income from employment, even though PAYE had been operated at the time of payment. The Special Commissioners' view was that the income fell within Case VI of Schedule D, but was exempted by Section 331 (the scholarship exemption – see SE06200).

The Revenue had accepted the Special Commissioners' decision on that point. Nevertheless the Revenue argued that as the income had suffered PAYE, and as the generally prevailing practice before the Special Commissioner's decision was to treat the income in question as income from an employment, Section 206 required certain assessments to be made on the basis of the old practice.

The Court decided that the outright exemption conferred by Section 331 must apply. The income was income from a scholarship and regardless of the merits of the Section 206 issue, Section 331 exempted the income.

Caution is therefore necessary in considering the application of Section 206, particularly where it is subsequently found that the income is exempt, or not within Schedule E