High Court of Ireland Decisions

1. The matter comes before the Court by way of Case Stated dated 22nd January, 1996 from Appeal Commissioner C.V.B. Diggin. The point at issue is whether the increase in the Widow's Social Welfare Contributory Pension granted in respect of qualified children was, for income tax purposes, the income of the widow.

2. The Respondent has been a widow since 1989 and has had five qualified children who reside with her whose births range over the years 1976 to 1987. The Respondent is a Secondary School Teacher employed by the Department of Education and is paid a salary from which income tax is deducted under P.A.Y.E. In the year ended 5th April, 1990 the Respondent received a widow's (contributory) social welfare pension totalling £6,482.10 from the Department of Social Welfare. The pension of £6,482.10 consisted of an amount of £2,704.50 in respect of the Respondent and £3,777.60 by way of increase thereto, in respect of the Respondent's five dependant children. The Inspector of Taxes by Notice of Assessment dated 26th February, 1991 assessed the Respondent on the full amount of the pension, viz. £6,482.10.

3. The assessment was appealed on 27th February, 1991, the ground of the appeal being that the widow's (contributory) social welfare pension was overstated by £3,778.00

4. The provisions aforesaid were amended by Section 18(1) of the Social Welfare Act, 1976 which increased the weekly rate of a widow's (contributory) pension and extended the rate of benefit where there were more than two qualified children.

5. Matters were put on a more broad based footing by the provisions of Section 95 of the Social Welfare (Consolidation) Act, 1981 which reads:-

6. Finally the Social Welfare (normal residence) Regulations, 1986 (No S.I. 376 of 1986) provides that increases in respect of child dependants are paid to the person with whom the child is regarded as residing in accordance with the rules set out in the Regulations. Rule 10 of the Regulations provides that:-

7. Counsel for the Inspector of Taxes submitted that by reason of the distinction between the definition of the word "beneficiary" meaning a person entitled to benefit as defined by section 2 of the Act of 1981, and "qualified child" as in Section 92 of the same Act, the widow not the qualified child is to be considered properly as the person to benefit. Furthermore, that section 92 expressly records the title to the pension in unambiguous terms thus -

8. Allied to this concept of entitlement, reference was made to section 93 dealing with the condition for receipt of benefit and emphasis was laid on the expression rate of widow's (contributory) pension in Sections 94 and 95 of the Act of 1981 as clearly indicating that the element(s) of any additional sum(s) to the basic widow's (contributory) pension were for the benefit of the widow and liable to charge for income tax under Schedule E. In my opinion this submission is not well founded. True, the mechanism for payment is that monies made available by the Oireachtas through the Social Welfare system are paid to the widow - but it is to enable her the better to provide, with State assistance, for the children, defined by the Acts as "qualified". It is a benefit related to the child or number of children, of an age and not only related to the widow, but also having a residence relationship.

9. Counsel sought to distinguish the case from that of O Coindealbhan (Inspector of Taxes) v O'Carroll [1989] I.R. 229 which was relied upon by the Respondent before the Appeal Commissioner. The distinctions sought to be drawn were that the structure and words used in the Garda Siochana Pensions Order, 1981 were materially different in that, in that case, there was an express provision for a children's contributory pension. While this is correct - and such clarity in the Social Welfare Acts would have been welcome - it is noteworthy that even in the Garda Siochana Pensions Order, the children's contributory pension was payable to the widow. Counsel argued that in the instant case the increase in the widow's (contributory) pension was referable to the circumstances of the recipient and it is the rate of the pension not the entitlement that attracts the chargeability to tax. Furthermore, that there was no statutory intention to create a trust in the additional monies received by the widow by reason of having a qualified child or children, because one of the uncertainties of a trust (certainty of object) was absent. It was contended that a trust by implication was not to be read into the Acts of the Oireachtas. Reference was made en passant to the decision of the Supreme Court in Chambers v Fahy [1931] (17 per O'Byrne J. at page 21) and considerable emphasis was laid on the views expressed in Bennion on Statutory Interpretation (Second Edition) at p. 361 et seq. on the nature of legislative implication and the legitimacy thereof.

10. The argument concerning trusteeship is interesting but in my judgment unnecessary to the issue to be resolved. The provisions of the Social Welfare Acts from which the Case Stated arises are not those of a Finance Act giving rise to taxation: were they so, the famous dictum of Rowlatt, J. in relation to taxing Acts; 'nothing is to be read in, nothing is to be implied' (Cape Brandy Syndicate v IRC [1921] 1KB 64) would be apposite. In my judgment the appropriate approach to Social Welfare legislation is to construe it purposefully.

11. Counsel first argued that any additions or increases to the basic widow's (contributory) pension were provided by the Oireachtas in the interest of the qualified child or qualified children and that the correct approach to the interpretation of the statutes was within the constitutional context. The argument was then developed by noting that while the widow was the beneficiary of a widow's pension; and that notwithstanding the fact that the Acts do not expressly state that the additional monies are those of the widow or child, the guidance provided by the judgment of Finlay C.J. in McGrath v McDermott [1988] I.R. 258 at 276 is of assistance:-

12. I have no difficulty in accepting the proposition that the Acts must be construed within the constitutional context and I follow the approach to the construction of the Acts as indicated in McGrath's case.

13. The second submission on behalf of the Respondent is that if there is any ambiguity in the terms in which the Acts are individually expressed, the Court is entitled to consider the purpose or purposes of the individual Act or the Acts taken as whole. Counsel drew attention to the different manner in which the basic benefit and the incremental element is treated. By illustration it was urged that the incremental element of the dependant child allowance is earmarked for the child as in Section 95 of the 1981 Act, it follows the child to the carer. In short the payment 'travels' with the child and is not allowed to lapse; the increment is clearly intended and destined for the child although the actual sum is paid to the widow. Giving the Acts a purpositive interpretation this seems to me to lead inexorably to the conclusion contended for by the Respondent.

14. The manner in which the Oireachtas has chosen to treat, for tax purposes, certain benefits payable under the Social Welfare Acts is reflected in Section 15 of the Finance Act, 1992 which provides as follows:-

15. Section 15 of the Finance Act, 1992 was amended by Section 10 of the Finance Act, 1995 by the substitution of the following subsection for subsection (2):-

16. From the foregoing it seems clear to me that from a position in which Social Welfare benefits were not chargeable to tax, the position was altered by the Finance Act, 1992 and tightened further by the Finance Act, 1995. Furthermore, the one benefit expressly provided for as not being chargeable to tax are amounts payable in respect of a qualified child.

17. I am satisfied that the submissions of Counsel for the Respondent that the reasoning of the Appeal Commissioner as set out in the Case Stated is correct. While the individual facts in the instant case are distinguishable from those in O Coindealbhain v O'Carroll , nevertheless the cogent and compelling logic of the ratio decidendi of the judgment of Lynch, J. is clearly applicable to this case.

18. While I do not feel constrained to embark on a detailed consideration of the concept of trusteeship of a widow, receiving an addition to a basic widow's (contributory) pension, a sum referable to each qualified child; I would nevertheless be of opinion that on a consideration of Yates (Inspector of Taxes) v Starkey [1951] C.H. 465; [1951] T.L.R. 661 that the widow to whom monies are paid in respect of a qualified child receives them not for her own benefit but on the basis that such monies would be laid out for the benefit of the qualified child.

19. The answer to the Appeal Commissioner's question whether he was correct in holding that the Respondent was not liable to income tax in respect of the increases in the weekly rates of Widow's (Contributory) Pension paid to her in respect of each qualified child who resided with her is therefore "Yes".