MacKinlay v. Arthur Young McClelland Moores & Co., [1989] S.TC 898, [1989] UKHL TC, [1989] BTC 587 (HL)

In discussing the nature of a partnership, Lord Oliver stated (p. 900):

"A partner working in the business or undertaking of the partnership is in a very different position from an employee ... If, with the agreement of his partners, he pays himself a 'salary', this merely means that he receives an additional part of the profits before they fall to be divided between the partners in the appropriate proportions. But the 'salary' remains part of the profits."

In discussing the nature of a partnership, Lord Oliver stated (p. 900):

A partner working in the business or undertaking of the partnership is in a very different position from an employee ... If, with the agreement of his partners, he pays himself a 'salary', this merely means that he receives an additional part of the profits before they fall to be divided between the partners in the appropriate proportions. But the 'salary' remains part of the profits.

The policy of a firm of accountants was to reimburse its partners for various costs of their moving their residence from one city to another at the request of the executive partnership committee. Lord Oliver stated:

"... It is inescapable as it seems to me, that the expenditure, motivated no doubt by the fact of moving house, which in turn was motivated by the desire to put the partner concerned in a better position to further the interests of the firm, was an expenditure serving and necessarily and inherently intended to serve the personal interests of the partner in establishing his private residence for himself and his family and it cannot be said to be exclusively for the purposes of the partnership practice."

Lord Oliver rejected a finding of the Court of Appeal that a firm of accountants could be regarded as a "notionally distinct entity" in order to assess the purpose of expenditures incurred by it in reimbursing the relocation expenses of its partners. "Partners are partners, however numerous; and mere numbers cannot in itself justify an attribution of a 'collective purpose' unjustified in the case of a small partnership."

Lord Oliver stated (p. 589) that "if, with the agreement of his partners, [a partner] pays himself a 'salary', this merely means that he receives an additional part of the profits before they fall to be divided between the partners in the appropriate proportions. But the 'salary' remains part of the profits."