Carvill v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Hart,Mr Justice Hart |
| Judgment Date | 24 July 2002 |
| Neutral Citation | [2002] EWHC 1488 (Ch) |
| Date | 24 July 2002 |
| Court | Chancery Division |
| Docket Number | Case No: HC01 01401 |
[2002] EWHC 1488 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
THE HIGH COURT OF JUSTICE
INISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Hart
Case No: HC01 01401
Case No: CO 3312/2001
Ms Elizabeth Gloster QC & Mr Giles Goodfellow (instructed by Slaughter & May, Solicitors) for the Claimant
Mr Timothy Brennan QC & Mr Rabinder Singh QC and Mr Hugh McKay (instructed by Solicitor of Inland Revenue) for the Defendants
Hearing dates :11 June—14 June 2002
Handdown Date: Wednesday 24 July 2002
JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Signed: …………………………………………….The Honourable Mr Justice Hart
Mr Justice Hart:
There are before me 14 preliminary issues ordered to be determined by Burton J by an order dated 11 January 2002. I am told that Burton J indicated that the court hearing those issues might conclude that one or more of them was inappropriate to be determined as preliminary issues. As appears below, that has happened.
The preliminary issues arise in relation to two sets of proceedings; first, a claim brought by the claimant against the defendants for recovery of the full amount of the sums paid by the claimant in respect of the defendants' demand for income tax and statutory interest for the years 1987/1988 to 1992/1993 inclusive ("the Earlier Years"). This claim ("the Claim for Restitution") was issued in the Chancery Division on 28 March 2001; and, secondly, a claim brought by the claimant for judicial review of the defendants' decision not to refund the whole or any part of the sums paid by the claimant against the defendants' demands for income tax and statutory interest for the Earlier Years. This claim (the Claim for Judicial Review) was commenced in the Administrative Court on 20 August 2001.
The background against which both claims are made consists of assessments to income tax made on the claimant in respect of the Earlier Years under Section 739 of the Income and Corporation Taxes Act 1988 (and in respect of the first of those years its predecessor Section 478 of the Income and Corporation Taxes Act 1970). The claimant appealed against those assessments ("the First Appeal") and that appeal came before a Special Commissioner, Mr T K H Everett, in November 1994.
By a decision dated 8 December 1994 ("the First Decision") the Special Commissioner held that the appeals failed, and determined the assessment in figures which had been agreed between the parties, namely
| 1987/88 | £785,142 |
| 1988/89 | £517,512 |
| 1989/90 | £854,964 |
| 1990/91 | £591,998 |
| 1991/92 | £445,617 |
| 1992/93 | £559,770 |
The claimant required a case to be stated pursuant to Section 56 of the Taxes Management Act 1970, but subsequently (after a substantially unsuccessful attempt to require Special Commissioner Everett to restate the Case—see [1995] 70 TC 126) withdrew his appeal to the High Court. He paid the tax in April 1995 and the statutory interest in June 1996. He now wants his money back. The Claim in Restitution and the Claim for Judicial Review have been designed as alternative routes to that end.
The defendants issued further assessments under Section 739 for the years 1993/4 to 1995/6 ("the Later Years"), and the claimant appealed these assessments ("the Second Appeal"). These appeals were heard by a Special Commissioner, Dr Avery Jones CBE. in November 1999 and February 2000. By a decision dated 20 March 2000 ("the Second Decision") he allowed the appeals. The defendants have not sought to appeal the Second Decision. They have also indicated that they do not propose to issue Section 739 assessments on the claimant in respect of the years of assessment from 1996/7 and onwards.
The central issue for determination on each occasion was whether Section 739 applied. The relevant statutory provisions are, so far as material, as follows:
" CHAPTER III
TRANSFER OF ASSETS ABROAD
739. Prevention of avoidance of income tax
(1) Subject to section 747(4)(b), the following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfer of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled outside the United Kingdom.
(2) Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated operations, such an individual has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled outside the United Kingdom which, if it were income of that individual received by him in the United Kingdom, would be chargeable to income tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts."
………..
" 741. Exemption from sections 739 and 740
Sections 739 and 740 shall not apply if the individual shows in writing or otherwise to the satisfaction of the Board either —
(a) that the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them were effected; or
(b) that the transfer and any associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation.
The jurisdiction of the Special Commissioners on any appeal shall include jurisdiction to review any relevant decision taken by the Board in exercise of their functions under this section.
………
742. Interpretation of sections 739 to 741
(1) For the purposes of sections 739 to 741 "an associated operation" means, in relation to any transfer, an operation of any kind effected by any person in relation to any of the assets transferred or any assets representing, whether directly or indirectly, any of the assets transferred, or to the income arising from any such assets, or to any assets representing, whether directly or indirectly, the accumulations of income arising from any such assets.
(2) An individual shall, for the purposes of section 739, be deemed to have power to enjoy income of a person resident or domiciled outside the United Kingdom if —
(a) the income is in fact so dealt with by any person as to be calculated, at some point of time, and whether in the form of income or not, to enure for the benefit of the individual; or
(b) the receipt or accrual of the income operates to increase the value to the individual of any assets held by him or for his benefit; or
(c) the individual receives or is entitled to receive, at any time, any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and on any assets which directly or indirectly represent that income; or
(d) the individual may, in the event of the exercise or successive exercise of one or more powers, by whomsoever exercisable and whether with or without the consent of any other person, become entitled to the beneficial enjoyment of the income; or
(e) the individual is able in any manner whatsoever, and whether directly or indirectly, to control the application of the income.
(3) In determining whether an individual has power to enjoy income within the meaning of subsection (2) above —
(a) regard shall be had to the substantial result and effect of the transfer and any associated operations, and
(b) all benefits which may at any time accrue to the individual (whether or not he has rights at law or in equity in or to those benefits) as a result of the transfer and any associated operations shall be taken into account irrespective of the nature or form of the benefits.
………
(9) For the purposes of sections 739 to 741 —
(a) a reference to an individual shall be deemed to include the wife or husband of the individual;
(b) "assets" includes property or rights of any kind and "transfer", in relation to rights includes the creation of those rights.
…………"
On both the First Appeal and the Second Appeal the claimant had sought to satisfy the Commissioner of the facts set out in paragraphs (a) and (b) of section 741. He failed to do so on the First Appeal but succeeded in doing so on the Second Appeal.
For the purposes of the issues which I have to decide it is only necessary to set out the transactions at which the assessments were directed in skeletal form, as follows:
(1) In 1976 the claimant incorporated R K Carvill & Co Ltd ("Carvill UK"), and Carvill UK commenced trading as a reinsurance broker placing US reinsurance business in the London market.
(2) In 1977 the claimant established a second UK company, R K Carvill (Holdings) Ltd ("Holdings") which acquired 100% of the share capital of Carvill UK.
(3) In 1980 the claimant established another company, R K Carvill (International) Ltd ("International"). The share capital in International, which was incorporated in Bermuda, was acquired by Holdings. The share capital of Holdings was owned as to 59% by the claimant and 41% by other parties ("the minority shareholders");
(4) In December 1980 the claimant acquired from Holdings...
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Carvill v Commissioners of Inland Revenue
...add this. I found the matter very interesting and I am very grateful to all counsel and solicitors for the presentation of the case. [2002] EWHC 1488 (Ch). Chancery Division. Queen's Bench Division (Administrative Court). Hart J. Carvill and Inland Revenue Commissioners R (on the applicatio......