Taxation — salaries tax — profits tax — whether person employee — approach — appeals on law only — applicability of indicia under “economic reality” and “control” tests — whether “honorarium” received by taxpayer chargeable to profits tax as opposed to sa
Court of First Instance
Inland Revenue Appeal No 2 of 2016
Anderson Chow J
20 September, 3 November 2017

T was a certified public accountant and a member of the Hong Kong Institute of Certified Public Accountants (the Institute). He was engaged by the Institute to act as a Workshop Facilitator and an Examination Marker for its Qualification Programme in 2010 and 2011. His remuneration for so acting was $50,400 (the Sum) described as an “honorarium”. For the year of assessment 2010/2011, T also worked as a lecturer with the HKU School of Professional and Continuing Education (HKU SPACE). Having been assessed to salaries tax on what he was paid by HKU SPACE, T was subsequently assessed to additional salaries tax on the Sum. He objected to this additional assessment. But it was confirmed by a determination of the Deputy Commissioner of Inland Revenue. T appealed to the Board of Review (the Board) against this determination. His appeal was allowed by the Board. The Commissioner of Inland Revenue (the Commissioner) then appealed to the High Court against the Board’s decision, raising the question whether the Board was wrong in law to find that the Sum should be regarded as assessable profits chargeable to profits tax as opposed to assessable income chargeable to salaries tax. Of the 10 grounds of appeal advanced on the Commissioner’s behalf: Grounds 1 to 3 related to the Board’s approach to the question of whether T was an employee of the Institute; Grounds 4 to 9 related to the Board’s treatment of the evidence on a number of matters; and Ground 10 consisted of the contention that the Board’s conclusion that T was not an employee of the Institute was perverse and contrary to the true and only reasonable conclusion.

Held, dismissing the appeal, that:

  • The question of whether or not work was performed in the capacity of an employee would be regarded by an appellate tribunal as a question of fact to be determined by the trial tribunal. (See para. 37.)
  • In an appeal on law only, the appellate tribunal must bear in mind what scope the circumstances provided for reasonable minds to differ as to the conclusion to be drawn from the primary facts found (Kwong Mile Services Ltd v Commissioner of Inland Revenue (2004) 7 HKCFAR 275 applied). (See para.38.)
  • Contrary to the Commissioner’s contention, the Board did not brush aside the “economic reality” test or the “control” test or adopt an inappropriate approach. It was not the law that the indicia in those two tests must be regarded as applicable and of importance in all cases or circumstances. Here, it was after a careful analysis of the facts that the Board decided not to apply those two tests. The Board’s approach was one of examining all the facts and then taking a macro holistic view of the whole case, which was an approach consistent with authority (Hall (Inspector of Taxes) v Lorimer [1994] 1 WLR 209, Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156 applied; Leung Kam Wah v Fung Yuk Ching (unrep., HCLA 43/2006, [2008] HKEC 698), Sae-Lee Srikanya v Chung Yat Ming [2009] 3 HKLRD 152 distinguished). (See paras. 40–48.)
  • The question of whether T was an employee of the Institute being one on which reasonable minds might differ, the Board’s decision that he was not could not be regarded as wrong in law. (See para.49.)
  • For the foregoing reasons, Grounds 1 to 3 were rejected. (See para. 50.)
  • The Board did not err in the ways complained of in Grounds 4 to 9. (See paras. 51–63.)
  • In view of the conclusions on Grounds 1 to 9, Ground 10 did not arise for separate consideration. (See para.64.)


This was an appeal by the Commissioner of Inland Revenue against the decision of the Board of Review that an “honorarium” received by the respondent-taxpayer should be treated as his assessable profits chargeable with profits tax. The facts are set out in the judgment.