Eagerpath Ltd v Edwards (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 14 December 2000 |
| Date | 14 December 2000 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Ward, Brooke and Walker LJJ.
Christopher Sokol (instructed by Jerrad Saunders Donn) for the appellant.
Timothy Brennan (instructed by the Solicitor for the Commissioners of the Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Arranmore Investment Co Ltd v IR Commrs TAX(1973) 48 TC 623
Carrimore Six Wheelers Ltd v IR Commrs TAX(1944) 26 TC 301
Cenlon Finance Co Ltd v Ellwood TAXELR(1962) 40 TC 176; [1961] Ch 50, 634 (CA)
Eagerpath Ltd v Edwards (HMIT) TAX[1999] BTC 253
Kleinwort Benson Ltd v Glasgow City Council ELR[1999] 1 AC 153
National Provincial Building Society & Ors v United KingdomTAX[1997] BTC 624
R v Special Commissioners, ex parte Tracy TAX[1996] BTC 68
Rose Smith & Co v IR Commrs TAX(1933) 17 TC 586
Schouten and Meldrum v Netherlands HRC(1994) 19 EHRR 432
Scorer (HMIT) v Olin Energy Systems Ltd TAXELR[1985] BTC 181; [1985] AC 645
Woolwich Equitable Building Society v IR Commrs ELR[1993] AC 70
Corporation tax - Practice and procedure - Assessment - Error or mistake - Decision of Board of Inland Revenue - Appeal against decision - Determination of appeal by special commissioner - Right of appeal against determination - Point of law in connection with computation of profits - Taxes Management Act 1970, Taxes Management Act 1970 section 33 subsec-or-para (4)s. 33(4).
The taxpayer company's profits included trading income and income from property. It appealed against an estimated assessment in respect of its first accounting period ending 30 April 1987. Subsequently, by letter the Revenue agreed the computations of the taxpayer company's profits for that period and accordingly the settlement of its appeal underTaxes Management Act 1970 section 54s. 54 of the Taxes Management Act 1970. The taxpayer company later claimed relief by reason of error or mistake in a return under Taxes Management Act 1970 section 33s. 33 of the Taxes Management Act 1970. A special commissioner dismissed the taxpayer company's appeal. On appeal to the High Court, the Crown contended that the appeal, to the extent that it raised a point of law, concerned the correctness of the commissioner's decision that the treatment of interest was part of the agreement underTaxes Management Act 1970 section 54s. 54, and that an appeal against such a determination was not "on a point of law arising in connection with the computation of profits" as required byTaxes Management Act 1970 section 33 subsec-or-para (4)s. 33(4).
Whether an appeal to the High Court was permitted in this case
In this case there was no question of law in connection with the computation of profits. The appeal was against the commissioner's determination that the treatment of interest was part of the agreement under Taxes Management Act 1970 section 54s. 54. In a rights based culture such a statutory scheme was out of place, i.e. a scheme providing no facility at all for express recourse to the High Court on a point of law of a preliminary kind such as exercised the mind of the special commissioner in this case. However, the proper construction of the current legislation was clear.
Walker LJ:
1. This is an appeal with the permission of Aldous LJ from an order of Arden J made on 13 May 1999. Her judgment is reported at [1999] BTC 253. Her order dismissed an appeal by a taxpayer company, Eagerpath Ltd ("Eagerpath") from a decision of a single special commissioner, the late Mr David Shirley, made on 13 August 1998. The special commissioner had dismissed Eagerpath's appeal from the rejection by the Board of Inland Revenue of its claim for relief under Taxes Management Act 1970 section 33s. 33 of the Taxes Management Act 1970 ("the Management Act"). The claim related to Eagerpath's liability for corporation tax for its accounting period ending as long ago as 30 April 1987, when the principal statute containing the substantive law as to corporation tax was the Income and Corporation Taxes Act 1970 ("the Taxes Act"). References in this judgment to provisions of the Management Act and the Taxes Act are to the provisions in the form in which they were in force at the relevant time.
2. This appeal is concerned largely with the procedural provisions of the Management Act, although it will be necessary to refer to a few substantive provisions of the Taxes Act. It is best to begin with some very basic points.
3. A company resident in the UK pays corporation tax on its profits as computed for the purposes of that tax: that is, in broad terms, on its taxable income and chargeable gains computed on the same general lines as for an individual resident in the UK. The management of all those taxes is regulated by the Management Act, and before the introduction of self-assessment the making of a return by the taxpayer and the making of an assessment by an inspector of taxes were important parts of the process by which tax liability was determined.
4. A taxpayer who objects to an assessment can appeal against it to the general or special commissioners. They are the fact-finding tribunal from whom an appeal lies only on a point of law. On an appeal to the commissioners the burden of proof is on the appellant taxpayer, because the taxpayer can be expected to know all about his own financial affairs, whereas the inspector may have little or no knowledge about them apart from the taxpayer's return.
5. Apart from the provisions about "discovery" and "error or mistake" which will be mentioned shortly, an assessment becomes conclusive either when the taxpayer fails to appeal within the permitted time limit, or when the commissioners determine the appeal (subject to any further appeal on a point of law which may be open to either side), or when the appeal is abandoned by the taxpayer or is settled by agreement.Taxes Management Act 1970 section 46 subsec-or-para (2)Section 46(2) of the Management Act provides as follows:
Save as otherwise provided in the Taxes Acts, the determination of the General Commissioners or the Special Commissioners in any proceedings under the Taxes Acts shall be final and conclusive.
6. The settling of appeals by agreement is provided for inTaxes Management Act 1970 section 54s. 54 of the Management Act, subs. (1) of which is as follows:
Subject to the provisions of this section, where a person gives notice of appeal and, before the appeal is determined by the Commissioners, the inspector or other proper officer of the Crown and the appellant come to an agreement, whether in writing or otherwise, that the assessment or decision under appeal should be treated as upheld without variation, or as varied in a particular manner or as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the Commissioners had determined the appeal and had upheld the assessment or decision without variation, had varied it in that manner or had discharged or cancelled it, as the case may be.
Subsection (2) gives the taxpayer a 30-day period during which he may resile from an agreement, and subs. (3) requires written notice to be given confirming an oral agreement. In practice a very large number of appeals are settled by agreement, and the agreement is often of a very informal character. It may (as in this case) amount to no more than the inspector, after making some inquiries, writing to say that he accepts the taxpayer's computations.
7. All these procedural provisions are intended to achieve finality in the determination of tax liabilities, but Parliament has since the early days of income tax recognised that in some circumstances fairness may require either the Revenue or the taxpayer to be given the opportunity of reopening an assessment which has in other respects become conclusive. The Revenue's power is to make a "discovery" assessment under Taxes Management Act 1970 section 29 subsec-or-para (3)s. 29(3) of the Management Act, which provides as follows:
If an inspector or the Board discover-
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(a) that any profits which ought to have been assessed to tax have not been assessed, or
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(b) that an assessment to tax is or has become insufficient, or
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(c) that any relief which has been given is or has become excessive, the inspector or, as the case may be, the Board may make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged.
The taxpayer's power is to make an "error or mistake" claim under s. 33, which provides as follows:
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(1) If any person who has paid tax charged under an assessment alleges that the assessment was excessive by reason of some error or mistake in a return, he may by notice in writing at any time not later than six years after the end of the year of assessment (or, if the assessment is to corporation tax, the end of the accounting period) in which the assessment was made, make a claim to the Board for relief.
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(2) On receiving the claim the Board shall inquire into the matter and shall, subject to the provisions of this section, give by way of repayment such relief … in respect of the error or mistake as is reasonable and just: Provided that no relief shall be given under this section in respect of an error or mistake as to the basis on which the liability of the claimant ought to have been computed where the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when the return was made.
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(3) In determining the claim the Board shall have regard to all the relevant...
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