Business, Legal & Accounting Glossary
The Westminster Doctrine refers to the principal that a person is entitled to make any lawful arrangement of his affairs that he sees fit in order to reduce liability to tax.
Under UK taxation law, the Westminster Doctrine is the principle that a person is entitled to make any lawful arrangement that one sees fits in order to reduce one’s liability to tax.
The doctrine is named after the verdict in the case: Commissioners Of Inland Revenue vs the Duke Of Westminster (1936), in which the House Of Lords upheld the Duke of Westminster’s right to remunerate his gardener through a covenant scheme, as a means to reduce his tax liability.
The principal that a person is entitled to make any lawful arrangement of his affairs that he sees fit in order to reduce liability to tax.
The Duke of Westminster paid his gardener a wage of £3 a week.
By agreement with the gardener he stopped paying the wage and, instead, entered into a covenant to pay him an equivalent amount.
Under the law that applied to the tax years in question (1929–30 and 1931–32) the gardener’s wage would not have given rise to a tax deduction but the covenant reduced the Duke’s liability to surtax.
When the case came before the House of Lords, Lord Tomlin stated: “Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax”
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This glossary post was last updated: 10th August, 2019 | 2 Views.