Levene v Inland Revenue

Factual and Procedural Background

The Appellant, a British subject, was assessed to income tax on dividends derived from securities of British possessions and on United Kingdom War Loan for the tax years 1921-22 through 1924-25. He claimed exemption on two grounds: (1) that he was not “resident” in the United Kingdom during the relevant years for the purposes of rule 2(d) of the General Rules applicable to Schedule C of the Income Tax Act 1918, and (2) that he was not “ordinarily resident” in the United Kingdom under section 46(1) of the same Act.

After the assessments were raised, the Appellant appealed to the Special Commissioners pursuant to section 27 of the Finance Act 1924. The Special Commissioners disallowed the claims and confirmed the assessments. A case was then stated for the High Court, where Judge [Rowlatt] affirmed the Commissioners’ decision. The Court of Appeal likewise dismissed the Appellant’s further appeal. The matter finally came before the House of Lords, which delivered the opinion summarised here.

Legal Issues Presented

1. Whether, during the tax years 1921-22 through 1924-25, the Appellant was “resident” in the United Kingdom within the meaning of rule 2(d) of the General Rules applicable to Schedule C.
2. Whether, during the same period, the Appellant was “ordinarily resident” in the United Kingdom for the purposes of section 46(1) of the Income Tax Act 1918 (exemption for War Loan interest).
3. Whether the Appellant’s departures from the United Kingdom fell within rule 3 (General Rules applicable to all Schedules), namely leaving “for the purpose only of occasional residence abroad,” thereby preserving liability to United Kingdom tax.

Arguments of the Parties

Appellant’s Arguments

• He had formed a settled intention in early 1918 to “live abroad,” sold his London home, and thereafter spent a majority of each year in hotels in France and Monaco.
• The absence of any fixed abode in the United Kingdom and the fact that he never spent six consecutive months in any tax year within the country demonstrated a lack of residence.
• Regular returns to England were explained by health needs, visits to relatives, religious observances, and administrative matters, all of which were said to be temporary and incidental.
• For “ordinary residence,” it was contended that the relevant test was a numerical comparison of days spent in and out of the United Kingdom; on that calculation he failed to meet the threshold.

Revenue Authority’s Arguments

• The Appellant retained substantial personal, familial, and religious ties with the United Kingdom and returned annually for four to five months with mechanical regularity.
• He had no settled establishment abroad until January 1925, continuing to live in hotels in much the same manner as he had done within the United Kingdom.
• Rule 3 applied because, as a British subject whose ordinary residence had been in the United Kingdom, he had left only for “occasional residence abroad,” leaving his tax liability intact.
• “Ordinary residence” required continuity and regularity of association with the United Kingdom, not a mere day-count comparison.

Table of Precedents Cited

Court's Reasoning and Analysis

The House accepted that the Special Commissioners’ conclusions constituted findings of fact which could be disturbed only for want of evidence. It then addressed the statutory terminology:

• “Reside” was given its ordinary dictionary meaning of dwelling “permanently or for a considerable time.” A person may reside in more than one place, and residence continues despite temporary absences.
• “Ordinarily reside” was held to connote residence with some degree of continuity, differing little from “reside”; it cannot be reduced to a mathematical calculation of days.

Applying these principles, the Lords identified ample evidence supporting the Commissioners’ findings:

• The Appellant, a British subject, had previously maintained a home in London and retained strong personal and religious ties with the United Kingdom.
• Between December 1919 and January 1925 he spent four to five months of each year in England, returning with “mechanical regularity.”
• While abroad he lived only in hotels and did not secure a permanent foreign residence until January 1925, indicating that absences were temporary and purpose-specific.
• Under rule 3, the pattern of leaving England for winter and returning for summer amounted to “occasional residence abroad,” preserving liability.

Alleged misdirection—namely that the Commissioners relied on conduct occurring after the earliest tax year—was rejected; subsequent conduct legitimately illuminated the purpose of earlier departures.

Holding and Implications

APPEAL DISMISSED.

The House of Lords affirmed that the Appellant was both resident and ordinarily resident in the United Kingdom for all relevant tax years, leaving the assessments intact. The decision underscores that:

• Residence and ordinary residence depend on qualitative factors such as continuity, ties, and purpose of absences, rather than a strict day-count.
• British subjects who relinquish a UK home yet continue to return regularly, without establishing a permanent abode abroad, remain taxable as residents.
• The factual determinations of Special Commissioners will seldom be overturned where evidence supports them, reinforcing their pivotal role in residence disputes.