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You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Gross Klein & Co v HM Inspector of Taxes [2005] UKSPC SPC00463 (01 March 2005) URL: http://www.bailii.org/uk/cases/UKSPC/2005/SPC00463.html Cite as: [2005] UKSPC SPC463, [2005] UKSPC SPC00463 |
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SPC00465
PARTNERSHIP – method of making profit adjustment when the preceding year basis applied – other questions on which there is no jurisdiction – appeal dismissed
THE SPECIAL COMMISSIONERS
GROSS KLEIN & CO Appellant
- and -
MRS R F BRAISBY
(HM INSPECTOR OF TAXES) Respondent
Special Commissioner: DR JOHN F AVERY JONES CBE
Sitting in public in London on 16 February 2005
Howard Gross FCA FCCA CTA and Anthony Klein FCA FCCA (partners) in person; James Reynolds (former partner) in person assisted by Jack Harris FCA and by his son Paul Reynolds for the Appellant
Clive Greenlagh and Henry Asenso, HM Inspectors of Taxes, for the Respondent
© CROWN COPYRIGHT 2005
DECISION
"41 At 105D-E [of Arnold] Lord Keith said that issue estoppel:
'may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue.'
- Estoppel per rem judicatam also extends to some types of abuse of process. Thus, at 104F, Lord Keith said:
'Cause of action estoppel extends also to points which might have been but were not raised and decided in the earlier proceedings for the purpose of establishing or negativing the existence of a cause of action'
- Lord Keith went on to explain what he had in mind in a little more detail at 104F-105B:
'In Henderson v Henderson (1843) 3 hare 100, 114-115, Sir James Wigram V.-C. expressed the matter thus:
'In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to the litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matters which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, expect in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.'…"
Profit adjustment
Total | Gross | Klein | Ladhani | Reynolds | |
Salaries | 70299 | 17236 | 10330 | 27175 | 15558 |
Percentage shares | 63207 | 32868 | 20858 | 9481 | |
Total | 133506 | 50104 | 31188 | 27175 | 25039 |
The Other Partners effected the profit adjustment by first adjusting the profit shares so that all partners received an additional profit share such that the additional profit share for Mr Reynolds represented 15% (his profit share) of a total amount, and the Other Partners received their profit shares of this total amount. The Other Partners then reduced their salaries by the same total amount in the proportions in which they shares profits between them. They contended that one could not make an increase in Mr Reynolds' salary as this would merely reduce his profit shares. The result is as shown below:
Total | Gross | Klein | Ladhani | Reynolds | |
Profit percentage | 63206 | 32867 | 20858 | 27175 | 9481 |
Profit adjustment | 42181 | 21934 | 13919 | 6327 | |
Adjusted profit shares | 105387 | 54801 | 34777 | 27175 | 15807 |
Salaries | 70298 | 17236 | 10330 | 27175 | 15558 |
Salary adjustment | -42181 | -25805 | -16376 | ||
Adjusted salaries | 28118 | -8567 | -6046 | 27175 | 15558 |
Total | 133505 | 46234 | 28731 | 27175 | 31366 |
When applied to the 1989-90 assessment, this method gives the following result:
Salaries | 28118 | -8567 | -6046 | 27175 | 15558 |
Profit shares | 161811 | 84142 | 53397 | 24272 | |
Total | 189929 | 75575 | 47351 | 27175 | 39830 |
Total | Gross | Klein | Ladhani | Reynolds | |
Salaries | 70298 | 17236 | 10330 | 27175 | 15558 |
Percentage shares | 63207 | 32868 | 20858 | 9481 | |
Profit adjustment | -3872 | -2455 | 6327 | ||
Total | 133505 | 46232 | 28733 | 27175 | 31366 |
When applied to the 1989-90 assessment, this method gives the following result:
Salaries | 70298 | 17236 | 10330 | 27175 | 15558 |
Profit shares | 119630 | 62208 | 39478 | 17945 | |
Total | 189928 | 79444 | 49808 | 27175 | 33503 |
Benefits to Mr Ladhani
Interest on tax overpaid and reduction in Mr Reynolds' salary
Determination
1987-88 | 1988-89 | 1989-90 | 1990-91 | |
Mr Gross | 65711 | 81190 | 79462 | 129464 |
Mr Klein | 41039 | 50979 | 49820 | 79376 |
Mr Reynolds | 22896 | 33701 | 40952 | nil |
(The figures for 1989-90 are slightly different from the ones quoted above, which were based on the return, as they contain later adjustments.)
J F AVERY JONES
SPECIAL COMMISSIONER
Release Date: 1 March 2005
SC 3016/98
Authorities referred to in skeletons and not referred to in the decision:
R (Nahar) v Secretary of State for Work and Pensions [2001] EWHC Admin 1049
Stancliffe Stone Co Ltd v Peak District National Park Authority [2004] EWHC 1475
Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273