Hudson's Trustees v. M'Intosh and Others [1920] ScotLR 571 (02 July 1920)

Hudson's Trustees v. M'Intosh and Others [1920] ScotLR 571 (02 July 1920)

The terms of the will do not take the case out of the general rule that beneficiaries must bear the income tax exigible on annuities; the phrase 'free income and proceeds' does not indicate an intention to pay annuities free of tax; thus, trustees are bound to deduct income tax from the annual payments to the beneficiaries.

Citation
[1920] ScotLR 571
Parties
First Parties (trustees): Robert M'Intosh and others, testamentary trustees of the late Mrs Isabella M'Intosh or Hudson; Second Parties (annuitants/beneficiaries): Robert M'Intosh and Mrs Margaret Agnes M'Intosh or Gibson; Third Parties (residuary Beneficiaries): Mrs Annie Holmes M'Intosh or Young and others, residuary legatees
Jurisdiction
Scotland
Judgment Date
02 July 1920
Procedural Posture
Special Case (court of Session, Inner House, Second Division) / Judgment on Questions of Law Regarding Income Tax Deduction From Annuities
Outcome
Trustees are bound to deduct income tax from annuity payments; beneficiaries are not entitled to payment without deduction of income tax.
Legal Topics
Construction of Testamentary Trusts, Incidence of Income Tax on Annuities, Interpretation of 'free Income' in Wills
Succession Trusts Taxation Construction of Testamentary Trusts Incidence of Income Tax on Annuities Interpretation of 'free Income' in Wills

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Parties

Robert M'Intosh and others, testamentary trustees of the late Mrs Isabella M'Intosh or Hudson

First Parties (trustees)

Robert M'Intosh and Mrs Margaret Agnes M'Intosh or Gibson

Second Parties (annuitants/beneficiaries)

Mrs Annie Holmes M'Intosh or Young and others, residuary legatees

Third Parties (residuary Beneficiaries)

Procedural Posture

Special Case (court of Session, Inner House, Second Division) / Judgment on Questions of Law Regarding Income Tax Deduction From Annuities

Legal Issues

  1. 1 Whether trustees are bound or entitled to deduct income tax from specified annuities payable to beneficiaries under a will
  2. 2 Whether beneficiaries are entitled to payment of annuities without deduction of income tax

Ratio Decidendi

The terms of the will do not take the case out of the general rule that beneficiaries must bear the income tax exigible on annuities; the phrase 'free income and proceeds' does not indicate an intention to pay annuities free of tax; thus, trustees are bound to deduct income tax from the annual payments to the beneficiaries.

Court Disposition

Trustees are bound to deduct income tax from annuity payments; beneficiaries are not entitled to payment without deduction of income tax.

Orders

  • First question (Are the trustees bound to deduct income tax from the annual payments?) answered in the affirmative.
  • Third question (Are the beneficiaries entitled to payment without deduction of income tax?) answered in the negative.