Carr (Inspector of Taxes) v Armpledge Ltd ; Same v Fielden and Ashworth Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 16 May 2000 |
| Date | 16 May 2000 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Peter Gibson, Brooke and Robert Walker LJJ
Lord Goldsmith QC and David Goy QC (instructed by Freshfields) for the taxpayers.
Christopher McCall QC (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Farmer (HMIT) v Bankers Trust International Ltd TAX[1990] BTC 410
Elliss (HMIT) v BP Oil Northern Ireland Refinery Ltd TAX[1985] BTC 555
Collard (HMIT) v Mining & Industrial Holdings Ltd TAX[1989] BTC 167
Corporation tax - Advance corporation tax ("ACT") - Surplus ACT - Carry-back - Claim for 1994 accounting period made before claim for 1993 - Whether taxpayer could require effect to be given to claims in the order in which they were made - Income and Corporation Taxes Act 1988,Income and Corporation Taxes Act 1988 section 239 subsec-or-para (3)s. 239(3) (Income and Corporation Taxes Act 1988 section 239s. 239 was repealed by Finance Act 1998, Finance Act 1998 schedule 3 subsec-or-para 12 part III schedule 27Schs. 3, para. 12(1) and 27, Pt. III(2) with effect in relation to accounting periods beginning on or after 6 April 1999).
This was an appeal by the taxpayer against a decision of Ferris J ([1998] BTC 322) that the taxpayers, two subsidiaries of BICC plc, could not require the inspector to give effect to claims to carry back surplus advance corporation tax ("ACT") in the order in which the claims were made, the earlier claim having been made after the later one.
On 11 May 1995 Armpledge made a claim to carry back surplus Act under the Income and Corporation Taxes Act, 1988, Income and Corporation Taxes Act 1988 section 239 subsec-or-para (3)s. 239(3) arising in the accounting period to 31 December 1994. On the next day it made a similar claim in respect of surplus ACT arising in the accounting period to 31 December 1993.
By giving effect to the claims in the order in which they were made, there would be mainstream corporation tax ("MCT") capacity for the years 1987 and 1988 against which ACT could be set, which would not otherwise be available because of the six-year time limit for making claims.
The facts in the Fielden case were similar and the issue was the same.
The special commissioners allowed the taxpayer' appeals against the Revenue's refusal to give effect to the claims in the order in which they were made. They held that that no express provision ofIncome and Corporation Taxes Act 1988 section 239 subsec-or-para (3)s. 239(3) would be infringed by giving effect to the claims in the order in which they were made, but the judge allowed an appeal by the Revenue on the ground that there was no express provision permitting the taxpayers to require the claims to be given effect to in that order.
Held, allowing the taxpayer's appeal:
A taxpayer was entitled to make use of the relief in the most advantageous way to him unless prevented from doing so by the legislation. The fact that Income and Corporation Taxes Act 1988 section 239s. 239 did not specifically entitle a claimant under Income and Corporation Taxes Act 1988 section 239s. 239 to choose the order in which claims were to be worked out did not preclude such a choice from being available. Effect had to be given only to the statutory requirements. The Revenue's view that claims had to be made in chronological order of accounting periods would involve unwarranted writing of words into the statute.
1. Peter Gibson LJ: There are two appeals before us, each raising the same question relating to advance corporation tax ("ACT"): Is a company, which has made a claim to carry back surplus ACT derived from one accounting period and has subsequently made a further claim to carry back surplus ACT derived from the immediately preceding accounting period, entitled to effect being given to those claims in that order? The appeals are brought by Armpledge Ltd. ("Armpledge") and Fielden & Ashworth Ltd. ("Fielden") respectively from the order made by Ferris J on 31 July 1998. Thereby the judge allowed the appeals of the inspector of taxes from the decision in principle on 25 March 1998 of the special commissioners who had answered that question in the affirmative. The judge answered that question in the negative. The decisions of the special commissioners and of the judge are reported together at [1998] BTC 322.
2. The special commissioners, having stated that Armpledge and Fielden were members of the same group of companies the ultimate parent of which is BICC plc and that the issue was the same in both cases, confined their recitation of the agreed facts to those relating to Armpledge. Only a brief summary is appropriate. Armpledge's accounting periods at all material times were calendar years. It made profits in each of the years 1987 to 1993 and a loss in 1994. It paid corporation tax on those profits. In 1993 and 1994 it paid dividends and accounted for ACT thereon, that ACT (£676,333 in 1993 and nearly £1.2m in 1994) being the surplus ACT for the 1993 and 1994 accounting periods. By letter dated 11 May 1995 it claimed under Income and Corporation Taxes Act 1988 section 239 subsec-or-para (3)s. 239(3) of the Income and Corporation Taxes Act 1988 ("the Taxes Act") to have the surplus ACT for the 1994 accounting period treated as if it was ACT paid in respect of distributions made by it in specified amounts in four earlier accounting periods (1991, 1990, 1989 and 1988). One day later on 12 May 1995 it made a similar claim to have the surplus ACT for the 1993 accounting period treated as if it was ACT paid in respect of distributions made by it in specified amounts in the 1988 and 1987 accounting periods. It required that effect be given to the latter claim after the earlier claim.
3. On 20 August 1997 the Revenue sent Armpledge two notices of a decision on a claim. On the claim in respect of surplus ACT for the 1994 accounting period, it allowed relief in respect of specified sums for the 1989 and 1988 accounting periods, those sums totalling some 30 per cent less than the total claimed by Armpledge. On the claim in respect of surplus ACT for the 1993 accounting period, it allowed relief in respect of specified sums for the 1991, 1990 and 1989 accounting periods in a total sum equal to the surplus ACT the subject of that claim but for different accounting periods. The Revenue thereby was refusing Armpledge's request that effect be given to the claims in the order in which they were made but was insisting that effect be given to the claim for the 1994 accounting period after effect was given to the claim for the 1993 accounting period. In practical terms the difference between the parties is that had effect been given to Armpledge's claims in the order in which they were made, Armpledge would be able to reclaim corporation tax in the sum of £361,603 paid for the 1987 accounting period, whereas if effect is given to the claim for the 1993 accounting period before that for the 1994 period, that tax could not be recovered.
4. The statutory scheme which operated at the material times (it has since been altered by the Finance Act 1998) was this. Every company is liable to corporation tax on its profits for each accounting period, that liability being commonly known as that for mainstream corporation tax ("MCT"). Accounting periods are usually of 12 months' duration, but may, if the company chooses, be shorter. A company making a qualifying distribution of profits, such as by way of dividend, in any accounting period is required to make a payment of ACT in respect of that distribution (Income and Corporation Taxes Act 1988 section 14s. 14 of the Taxes Act). Under Income and Corporation Taxes Act 1988 section 239 subsec-or-para (1)s. 239 (1) of the Taxes Act that ACT (subject to a limit specified inIncome and Corporation Taxes Act 1988 section 239 subsec-or-para (2)s. 239 (2)) was set against its MCT liability on its profits for that accounting period. MCT liability against which ACT can be set is known as "capacity". When the ACT exceeded the MCT for the relevant accounting period a surplus (known as surplus ACT) arose. By Income and Corporation Taxes Act 1988 section 239 subsec-or-para (4)s. 239(4):
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