Overview of the Set for Life Lottery Win Case
As per the given situation a lottery commissions disburses the amount for lottery payments in three set of payments. However, in an event of death of a winner the commission is liable to pay the amount to the estate of the deceased. The main issue associated to this matter is associated with whether to conifer the annual payment as income.
The main form of the law pertaining to the ordinary income can be depicted under “s6-5”. The judicial concept of the ordinary income is related to the principles which are ascertained from decisions. The role of the tax legislation consists amount pertaining to the ordinary income in case the amount meets case law principles. The amount is directly identified with the income assessment as per “s6-5 ITAA” (Mihaylov et al. 2015). The treatment of ordinary income is also evaluated with the principles which are closely associated to the income which are relevant to the usage done by mankind and ordinary concepts. This is considered with “Scott v CT (1935) 35 SR NSW) 215”. The applicable characteristics of the income can be depicted in the case of “FCT v Myer Emporium (1987)”. In addition to this, the case of “FCT v. Dixon (1952) 86 CLR 540” can be also considered in the situation (Novikov, Ling and Kordzakhia 2014).
The prerequisite of the income satisfied with the gains which are associated with the gains of the ordinary income. The regular and the periodical receipts and the flow concept needs to be held assessable under the ordinary income. This is seen to satisfy the criteria of ordinary income. The assertions from the case of “FCT v. Dixon (1952) 86 CLR 540”, is able to state about the nature of the receipt which should be held into consideration with former employees pertaining to the concepts of the policy and the difference associated wit the pay which was not enlisted. However, in 1943 it was decided that this payment did not come directly under the employment services and still held for assessment under taxation. The application of a similar situation in the “Scott v C of T” illustrates that income was not considered as part of the receipts and principles which are considered with the information related to the receipts which must be treated as income in accordance with the ordinary concept. The receipt of the case of Scott is also depicted with the several information which shows that payee is not considered as per capital expenditure (Ally, Gardiner and Lane 2016).
Principles of Ordinary Income and Relevant Court Cases
As per the depiction from the definitions made from the concepts of ordinary income it can be discerned that any income which characterises the regular and periodical receipts should be taken into consideration as ordinary income. In addition to this, any income flowing the flow concept will be also assessed under the ordinary income. As per the given situation the annual payment needs to considered as an income and payments of the commission for the outstanding amount needs to be held assessable for taxation.
The application of the principles established as per the case of “IRC v Duke of Westminster [1936] AC 1” is stated with the facts, issues and the disposition.
The Facts of the case
As per the given case Duke executed a deed in terms of employability including the gardeners in which he needed to make them certain amount of money on a weekly basis for a period of seven years. The agreements of the deeds recited on the payments which were associated to the recognition of the previous services rendered pertaining to Duke for making the provision not withstanding the same may continue in work under Duke or even stop to work for Duke. This is applicable to any event in which Duke will be entitled for remuneration in the aspects of future services.
As per the explanations provided to the individual employees it was depicted that each employee informed about claiming for the entire amount of renumeration for the work provided in future. However, when brought into practice that individual will be content for the provision made as per the deed added with the sum as it may be necessary for the total payments for the level of salary and receiving of the wage.
The Issue
The issue related to the given situation has been depicted with the several types of the considerations which are seen with the tenure of Duke employed for the remuneration services and this was not considered for the deductions as the liability on surtax. On the contrary, the amount is associated to the annual payments which made them deductible in nature. Therefore, this issue is identified with whether payments pertaining to remuneration for the deeds is considered as services or not (Kraal, Yapa and Joshi 2015).
The payments were not considered as remuneration for the services. It is identified that out of five Lords, three stated that the letter was not a contract and it was to be only considered as the expression for hope or anticipation. Moreover, it was concluded by the Lords that even it was a contract, it is not be considered anything more than person’s remuneration pertaining to the future services. The fifth Lord also stead about the deeds and letter to be viewed together with simply maintaining the existing contract of services instead of radical altering (Bonevski et al. 2017).
Discussion on Tax Avoidance Vs Tax Evasion
All the relevant Lords rejected the consideration for the proposition of the revenue cases as stated in the doctrine and the court may also ignore the legal onus for the statement of the substantive matter in its declaration. This resulted in the various types of the important discussions which are associated to the legal rights and obligations for the parties to agree upon the ordinary legal principles (Fauziati et al. 2016).
In general, people dislike the fact of paying taxes. It needs to be understood while tax avoidance is legal but tax evasion is not. Moreover, at times it may be difficult to comprehend with the differences of the two concepts. Tax evasion is the at of deliberately escaping the tax which is needed to be paid by any individual, on the other hand tax avoidance is related to the concept reducing the tax which needs to be paid otherwise (Fauziati et al. 2016). In order to distinguish among the two, it is important to consider tax evasion as a deliberate attempt of concealing or misrepresentation of the true state of affairs in lieu of the tax authorities for reducing the bill. The most appropriate reference case for this act has been depicted in terms of “IRC v Duke of Westminster (1936)”. The overall result showed that Duke of Westminster won the case (Schultz and Mitchenson 2016).
Referring to the given case, the common law applied to the offence related to the fraudulent is seen to be specific to the fraudulent evasion of IT as per the taxes act established in 2000. Despite of such a treaty, the legislation was not frequently utilised as part of the revenue and often considered to be a part of the common law when prosecuted. This also varied occasionally, in which the taxpayers were prosecuted as per the Theft Act associated to false accounting under “Fraud Act 2006”. However, the majority of the cases pertaining to the tax evasion relates to the application of common law for criminal offense for public revenue cheating. The different types of the cases pertaining to the common law are established as per the offence which does not have to be dishonest act and omission pertaining to failing to register will be sufficed with the same act (Douglas et al. 2014).
The imposition of the penalties is needed to be considered with no maximum penalties in case an individual is found to be guilty. The initiatives of the recent years have been identified with the government taking the relevant steps to reduce the £42 billion pertaining to the ‘tax gap’ (Gupta et al. 2017). This amount is considered with the tax amount which is needed to be paid in comparison of the actual amount paid. This has further stated that there has been nor than a sixth of the amount which is due to the tax evasion. It has also stated that there has been further one sixth amount as per the tax evasion (Pert, Abi-Hanna and Smith 2016).
Recent Government Initiatives to Tackle the Tax Gap
The tax avoidance disclosure which was issues in March 2011, was associated to the issuing of document entitled as “Tackling Tax Avoidance” which are detailed with approach of tax avoidance in future. This document is also intended to develop the rules linked with the Tax Avoidance Disclosures and planning of the taxation schemes. These are seen to be notified by the tax authorities after they has been able to marketed or implemented. The main intention for this is further considered with the users able to differentiate the “ordinary sensible tax planning” and “artificial avoidance schemes” (Torgler 2016).
In addition to this, some of the other propositions made by HMRC has described about the schemes pertaining to the tax avoidance which has been encountered in the spotlight. HMRC has sent new tax assessment to the concerned individuals. Although they have not issued any proceedings with the court, they have relied on warnings. The warning states that HMRC may use full range of powers for identification and challenges pertaining to schemes failed by the users (Berg and Davidson 2017).
Issues
In the given scenario Joseph and Jane borrowed money for purchasing of rental property as joint tenants. However, they signed a written contract for sharing of 20% (Joseph)-80% (Jane) profit pertaining to the property. The agreement was also related to the clause that in case of loss, this was attributable to 100% to be borne by Joseph. It was reported that the property generated a loss $ 40,000 in the previous year. The main issue with this concern is related to whether to consider the loss amount is to be based under taxation purpose or general law?
Law
The extent of the taxation ruling has been considered “Part IVAAA of the Taxation Administration Act 1953”. The issue needs to be assed under the taxation ruling of “TR 93/32”. This ruling is named as IT from the rental property and as a division of the net income or loss pertaining to the co-owners. The explanation of the partnership at the general law are determined with the application of the “Partnership Act of 1891”, “Partnership Act of 1891” and “The Partnership Ordinance of 1963 (ACT)” (Tran-Nam 2016). Some of the other cases used are seen with the application of the tax assessment done with the “F.C. of T. v McDonald (1987)” 18 ATR 957 in which the true partners were assessed under the general law. In addition to this, there has bee also the application of “Subsection 6(1) of the Income Tax Taxation Ruling”. Some of the other reference of the case has been considered with “FCT v Whiting (1943) 68 CLR 199 at 204” (Antwi, Inusah and Hamza 2015).
Application
The application of the various legislations of the taxation has been considered with the rulings pertaining to the acceptance of the IT as per net income or loss associated to the rental property adhered with the rental property among the co-owners. This ruling has also examined the position of taxation for the co-owners in the activities which do not include any carrying amount. As per the application of this law the co-ownership among the partnership is considered with the income/loss pertaining to the rental amount of property as a result of the co-ownership of the property instead of distribution of the partnership profit/loss. This is due to the reason that co-owners of the rental property are not considered as partners at the general law of the until the ownership is considered with the carrying amount of business (Bird and Zolt 2014).
As per the assertions of the income/loss the rental properties are needed to be shared in terms of the legal interest for the owners except in cases where the owners are depicted with a limited circumstance of the evidences established with the different types of the legal title (De Castro and Kober 2018).
Moreover, as per the rulings of Co-ownership, it is important to exercise the most possible legally presumable rights. These are generally considered as per the interests of the proprietor. The co-owners are needed to held as joint tenant’s ant tenants in common. These are seen to be considered with the interest of co-owners. The important discussions for the partnership at the general level of law are stated with the partnership defined as per the State and Territory partnership acts. These considered in relation to the persons who are seen to be carrying of the business with the viewpoint of earning profit. The determination of the case “F.C. of T. v McDonald (1987)” has been stated that both the taxpayers (husband and wife) were entitled as joint tenants (Mumford 2017). This is similar to the case of Joseph and Jane in which they borrowed the money for purchase of rental property as per joint tenancy. Moreover, in the case of McDonald both the properties were rented. It was recorded that the net profit was distribution of 25% to Mr McDonald and 75% to Mrs McDonald. Moreover, the net loss was to be borne by Mr McDonald. The important question was raised with whether there had been any operating loss which was to be applied wholly incurred by the taxpayer or one-half of the loss. The is similar to the agreement related to the clause that in case of loss, this was attributable to 100% to be borne by Joseph. The issue was similar to whether to consider the loss amount is to be based under taxation purpose or general law (Emery 2016).
It was contended that there had been no instance of partnership considered at the general level and only relevant among the relationship among the parties though co-ownership. Moreover, as the parties were joint tenants, the loss associated to the renting the property needs to be shared as per equal deductions in terms of the loss. Therefore, as per the given consideration Joseph needs to bear only 50% of the loss. In the case of McDonalds as the joint tenants incurred a loss and this needs to be shared in equal terms as per only half of the loss (Coleman 2016).
Conclusion
It can be concluded that as per the application of “TR 93/32” the implementation of the various legislations of the taxation has been considered with the rulings pertaining to the acceptance of the IT as per net income or loss associated to the rental property adhered with the rental property among the co-owners. Moreover, it is also assessed that As per the application of this law the co-ownership among the partnership is considered with the income/loss pertaining to the rental amount of property as a result of the co-ownership of the property instead of distribution of the partnership profit/loss. Therefore, there had been no instance of partnership considered at the general level and only relevant among the relationship among the parties though co-ownership. Henceforth, Joseph needs to bear only 50% of the loss.
References
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