Beecham Group Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 06 November 1992 |
| Date | 06 November 1992 |
| Court | Chancery Division |
Chancery Division.
Mervyn Davies J.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Graham Aaronson QC (instructed by Linklaters & Paines) for Beecham.
The following cases were referred to in the judgment:
Balen v IR Commrs & Ors TAX(1978) 52 TC 406
Clinch v IR Commrs ELR[1974] QB 76
Dyson v A-G ELR[1911] 1 KB 410
Essex & Ors v IR Commrs & Anor TAX(1980) 53 TC 720
Howard v Borneman & Ors (No.2) ELR[1976] AC 301
IR Commrs v Aken TAX[1990] BTC 352
Owton Fens Properties Ltd v Redden (HMIT) TAXTAX(1984) 58 TC 218; [1984] BTC 395
Royal Bank of Canada v IR Commrs ELR[1972] Ch 665
Vandervell's Trusts Re ELR[1971] AC 912
Wilover Nominees Ltd v IR Commrs TAX(1973) 49 TC 559
Corporation tax - Open appeals before special commissioners - Revenue threatened to issue notice demanding information with a view to amending assessments under appeal alleging transactions were not at arm's length - Taxpayer claimed Revenue not entitled to amend assessments and proceeded by originating summons for declaration that demand for information invalid - Revenue applied to strike out originating summons - Whether court had jurisdiction to entertain taxpayer's originating summons - Whether court should exercise discretion to declare notice demanding information would be invalid - Income and Corporation Taxes Act 1970 section 485Income and Corporation Taxes Act 1970, sec. 485; Finance Act 1975 section 17 subsec-or-para (3)Finance Act 1975, sec. 17(3) (replaced by theIncome and Corporation Taxes Act 1988 section 770 section 772 subsec-or-para (3)Income and Corporation Taxes Act 1988, sec. 770 and 772(3) respectively).
This was an application by origination summons by the Revenue seeking to strike out an originating summons by the taxpayer. The grounds of the application were that the court had no jurisdiction to entertain the taxpayer's action because the subject matter was within the exclusive jurisdiction of the special commissioners.
Appeals by Beecham against assessments to corporation tax for periods between 1977 and 1985 were before the special commissioners. Before the hearing of the appeals was concluded the Revenue sought information which might prompt the Revenue to amend the assessments under appeal. To that end the Revenue indicated that they would exercise their powers under the Finance Act 1975 section 17 subsec-or-para (3)Finance Act 1975, sec. 17(3) in order to invoke theIncome and Corporation Taxes Act 1970 section 485Income and Corporation Taxes Act 1970, sec. 485 (transactions between associated persons). Non-compliance with a notice issued underFinance Act 1975 section 17 subsec-or-para (3)sec. 17(3) would render Beecham liable to penalties.
Beecham applied by an originating summons for a declaration that the Revenue were not entitled to apply the provisions of Income and Corporation Taxes Act 1970 section 485sec. 485 to assessments to corporation tax for accounting periods ending before 1 April 1984. The grounds of Beecham's application were that it was not open to the Revenue to seek to alter the existing assessments pursuant toIncome and Corporation Taxes Act 1970 section 485sec. 485 because any tax liability disclosed in response to aFinance Act 1975 section 17sec. 17 notice would have to be made, if at all, the subject of a new or further assessment, and it was common ground that it was too late to make any further assessments. In those circumstances Beecham should not be put to the costly and time-consuming task of complying with a Finance Act 1975 section 17sec. 17 notice which would be oppressive and a waste of time.
Faced with Beecham's originating summons the Revenue themselves issued a summons seeking an order that Beecham's application be struck out under the inherent jurisdiction of the court or under O. 18. r. 19(1)(a) or (d) of the Rules of the Supreme Court.
The Revenue contended that it was an abuse of process to proceed by action in the High Court when there were open appeals against the relevant assessments before the special commissioners. Further, save in exceptional circumstances, the special commissioners had exclusive jurisdiction to determine the appeals on the relevant facts and a taxpayer could not litigate a point of law arising in the appeal.
The issues were: first, whether the court had jurisdiction to entertain Beecham's originating summons; and second, if so, whether the court should, in its discretion, refuse to allow the originating summons to proceed.
Held, dismissing the Revenue's application:
1. The court was a proper forum for the resolution of a question of the Revenue's right to extract information in a situation where the taxpayer had no statutory right of appeal against a demand for information and where a failure to comply with such a demand entailed a penalty. Accordingly the court had jurisdiction to hear Beecham's originating summons. (Re Vandervell's TrustsELR[1971] AC 912 per Lord Dilhorne at p. 365 and per Lord Diplock at p. 374 distinguished. Balen v IR Commrs TAX(1978) 52 TC 406 per Oliver J at p. 414 followed).
2. If the questions raised by the originating summons were not to be decided by the court at this stage, Beecham would have to comply with aFinance Act 1975 section 17sec. 17 notice and the special commissioners might then decide that the Revenue were not entitled to the information demanded. The time and expense involved in complying with the notice would then have been wasted. It was convenient and economic that the court should decide the point rather than leave the matter to be considered by the special commissioners after Beecham the amassing of information which, at the end of the day, might be shown to have been unnecessary.
Mervyn Davies J: This is an application to strike out an originating summons. Beecham Group plc ("Beecham") is the plaintiff in the originating summons which is dated 7 June 1991. The defendants are the Commissioners of Inland Revenue. In the originating summons Beecham ask for a declaration that the Revenue are not entitled to apply the provisions of Income and Corporation Taxes Act 1970 section 485sec. 485 of the Income and Corporation Taxes Act1970 to Beecham in respect of Beecham's accounting periods ending before 1 April 1984. As I understand it the Revenue have in mind invokingIncome and Corporation Taxes Act 1970 section 485sec. 485 in respect of Beecham's accounting periods after 31 March 1977 up to 31 March 1985. Faced with the originating summons, the commissioners issued a summons dated 5 September 1992 wherein they seek an order that the originating summons be struck out under the inherent jurisdiction of the court and/or under O. 18, r. 19(1)(a) or (d) of the Rules of the Supreme Court. Although the summons was phrased in that way it was made clear at the outset that striking out was sought on the grounds that the court has no jurisdiction to hear the originating summons; or, if it has, that the court ought in its discretion to refuse to hear it. The suggestion that the court has no jurisdiction is founded on the contention that whether or not the Revenue may, in the circumstances of this case, invoke Income and Corporation Taxes Act 1970 section 485sec. 485 is a question within the exclusive jurisdiction of the special commissioners.
The plaintiffs, the well known pharmaceutical company, have associated companies worldwide. Assessments for corporation tax against Beecham are under appeal. The...
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