Centaur Clothes Group Ltd v Walker
| Jurisdiction | England & Wales |
| Judgment Date | 01 April 1996 |
| Date | 01 April 1996 |
| Court | Special Commissioners |
special commissioners decision
Mr Paul W de Voil.
David Goldberg, counsel (instructed by Ernst & Young ,chartered accountants) for the taxpayer.
Michael Furness, counsel (instructed by the Solicitor of Inland Revenue).
Corporation tax - Surplus advance corporation tax (ACT) - Claim to carry back ACT - Taxpayer company ceased trading selling assets to fellow group member leaving price outstanding as inter-company debt - Agency agreement with fellow member of group - Neither company produced income in the relevant accounting period - Taxpayer paid dividend to parent - Whether ACT could be carried back and treated as if it had been paid in respect of distributions in earlier periods - Whether taxpayer remained within the charge to tax and had an accounting period when dividend paid - Income and Corporation Taxes Act 1988 section 12 section 239 subsec-or-para (3) section 832 subsec-or-para (1)Income and Corporation Taxes Act 1988, ss. 12, 239(3), 832(1).
1. The Centaur Clothes Group Ltd (Centaur) appeals against the rejection of its claim under s.239(3) of the Income and Corporation Taxes Act 1988 (the Act) that surplus Advance Corporation Tax (ACT) of £695,704.10 (being the amount of ACT, duly paid by it, in respect of a dividend of £2,087,113 paid by it to its parent company William Baird Plc on 5 April 1993) should be treated as if it were ACT in respect of distributions made in accounting periods ending on 31 December 1991 and 31 December 1990.
2. There is no dispute as to figures or the periods to which the ACT, if available, can be carried back. The sole point at issue is whether the dividend paid on 5 April 1993 was paid in an accounting period of Centaur.
3. The following agreed statement of facts was put in:-
-
1. The Centaur Clothes Group Ltd ("Centaur") is a wholly owned subsidiary of William Baird plc, a publicly quoted company; it is, and has at all material times been, resident in the United Kingdom.
-
2. For many years up to and including 5 January 1992, Centaur carried on trade as a manufacturer, distributor and retailer of men's outerwear.
-
3. On 6 January 1992, Centaur transferred its business assets and liabilities to Baird Textile Holdings Limited ("Baird Textiles"), another wholly owned subsidiary of William Baird plc.
-
The transfer was effected by the following agreements:-
-
(i) a sale agreement dated 6 January 1992 relating to properties;
-
(ii) a sale agreement dated 6 January 1992 relating to business assets.
-
At the same time as these sale agreements were entered into, Centaur and Baird Textiles entered into an agency agreement dated 6 January 1992.
4. Under the sale agreements referred to in 3 above Baird Textiles was liable to pay the net book value of the assets transferred to it by Centaur: this price was left outstanding owing to Centaur; the sum owed was at all material times £4,290,249. There was no express agreement between Centaur and Baird Textiles about the payment of interest on the outstanding sum. Payment of the said sum or interest thereon was never demanded.
5. On 5 April 1993 Centaur declared a dividend ("the first dividend") of £2,087,113 payable to William Baird plc. Payment of this dividend was achieved by the amount being set against the inter-company debt of £4,290,249 which was thereby reduced. The advance corporation tax attributable to the first dividend was £695,704.10, which sum was paid to the revenue by Baird Textiles on behalf of Centaur.
6. On 30 September 1993 Centaur opened a Midland Moneymaster account and interest was credited to this account in December 1993.
7. On 8 December 1993, Centaur paid another dividend ("the second dividend") of £915,000 and the appropriate advance corporation tax of £265,645.16 was duly paid to the revenue.
8. Centaur drew up accounts for the period beginning 1 January 1993 and ending 31 December 1993. Centaur has not drawn up any other accounts for any part of the period covered by these accounts.
9. On 14 February 1994 Centaur submitted computations to the revenue of its corporation tax position for the year ended 31 December 1993 and claimed a carry-back of advance corporation tax under ICTA 1988 section 239(3) in respect of the advance corporation tax relating to both the first dividend and the second dividend.
On 16 September 1994 the revenue accepted the section 239(3) claim made in respect of the advance corporation tax relating to the second dividend, and have repaid tax to Baird Textiles in accordance with Centaur's direction.
10. However on 13 December 1994 the revenue formally refused Centaur's section 239(3) claim made in respect of the advance corporation tax paid in relation to the first dividend. Centaur appealed against the refusal of this claim on 9 January 1995.
4. From the documents mentioned in the statement of facts (which I shall not set out in full in this decision) and other documents produced at the hearing, I find the following further facts:-
-
(a) The sale...
To continue reading
Request your trial
-
Walker (Inspector of Taxes) v Centaur Clothes Group Ltd
...This allowed Centaur to recover the £265,645.16 ACT paid on 8 December 1993. 12 The special commissioner (Mr. Paul W. de Voil) said [1996] S.T.C. (S.C.D.) 222, 226 that the revenue's submission was contrary to common sense: "On the revenue's argument, Centaur is to be repaid £265,000 becaus......