Ellis v I.C.I. Petroleum Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 11 July 1983 |
| Date | 11 July 1983 |
| Court | Chancery Division |
Chancery Division.
Mr. R. Carnwath (instructed by Solicitor of Inland Revenue) for the Crown.
Mr. P. Whiteman Q.C. and Mr. T. Mowschenson (instructed by Mr. V.O. White of ICI) for the taxpayer.
Before: Peter Gibson J.
Advance corporation tax - Supplementary petroleum duty - Deduction of duty in calculating corporation tax - Date of entitlement to repayment of advance corporation tax - Whether right to repayment had arisen -Taxes Management Act 1970 section 42 subsec-or-para (1) section 42 subsec-or-para (7)Taxes Management Act 1970, sec. 42(1), (7); Finance Act 1972 section 85Finance Act 1972, sec. 85; Finance Act 1981 section 127 subsec-or-para (1) section 127 subsec-or-para (5)Finance Act 1981, sec. 127(1), (5).
This was an appeal by the Crown from a decision of the Special Commissioners relating to the right of the taxpayer company to a repayment of advance corporation tax (ACT). In dispute was, not the existence of the right to repayment or the amount of the repayment, but the date on which the entitlement to repayment arose.
The taxpayer company extracted oil from the North Sea as part of its trading activities. For the chargeable periods ending 30 June and 31 December 1981 the company paid supplementary petroleum duty of £58.7 m. As provided for by Finance Act 1981 section 127 subsec-or-para (1)sec. 127(1) of the Finance Act 1981, that amount was to be deducted in computing its profits for corporation tax purposes for the period ending December 1981.
In March 1982 the company submitted its 1981 accounts showing a profit for tax purposes (after payment of supplementary petroleum duty) of £165.5 m. On the same date the company submitted a claim to the Oil Taxation Office under Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) of the 1981 Act for the above period, for repayment of ACT. This ACT was regarded, underFinance Act 1972 section 85 section 92sec. 85 and 92of the Finance Act 1972, as having been paid in respect of distributions made by the company during the period.
The company appealed against the refusal of this claim to repayment. The question before the Commissioners was whether the right to repayment had already arisen. The Crown appealed against the Commissioner's determination that the taxpayer company was entitled to the repayment claimed.
For the Crown it was argued that the right to repayment arose on the making of an assessment to corporation tax for the relevant period or, in the case of a company making no profits, the date when the inspector of taxes agreed that no tax was payable. Alternatively, the Crown contended, that right arose on the date an assessment became final; alternatively on the "due and payable" date. The reference inFinance Act 1981 section 127 subsec-or-para (5)sec. 127(5) to the deduction having been "made" was, in its context of a computation for corporation tax, a reference to what was done by the assessing authority. The dispute, as claimed by the Crown, was whether the reference to setting ACT against corporation tax liability imported a reference to Finance Act 1972 section 85sec. 85 of the Finance Act 1972.
The company submitted that all conditions precedent to the making of a valid claim under Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) had been satisfied. It was further argued that there was no express or implied restriction in Finance Act 1981 section 127sec. 127 excluding the right to repayment or leading to deferment. Taxes Management Act 1970 section 42 subsec-or-para (1) section 42 subsec-or-para (7)Section 42(1) and (7) of the Taxes Management Act 1970 was relied upon as being applicable to this, as to any other claim by a taxpayer for repayment. Counsel also pointed to the mandatory words "shall be repaid" inFinance Act 1981 section 127 subsec-or-para (5)sec. 127(5). The final submission was that, in applying Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5), one has regard to Finance Act 1972 section 85sec. 85 of the Finance Act 1972 only to determine the amount of ACT and not the timing of the repayment.
Held, appeal dismissed.
1. Entitlement to repayment of ACT in respect of petroleum revenue duty and supplementary petroleum duty arose as soon as the conditions set out in Finance Act 1972 section 85sec. 85 of the Finance Act 1972 and Finance Act 1981 section 127sec. 127 of the Finance Act 1981 were satisfied. Repayment was not to be deferred until an assessment to corporation tax for the relevant accounting period had been made.
2. It was apparent from Finance Act 1972 section 85sec. 85 of the Finance Act 1972 that until the income for the entire accounting period had been ascertained, the amount of ACT that could be set against corporation tax liability could not be known. However, the wording of Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) did not support the Crown's submission that there was a deferment of the right to repayment until an assessment had been made.
1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 10 and 11 August 1982 ICI Petroleum Ltd. (hereinafter called "the appellant") appealed against the decision of the inspector of taxes on a claim for repayment of advance corporation tax.
2. Shortly stated the question for our decision was whether the appellant was entitled to repayment of advance corporation tax amounting to £17,635,681 under the provisions of Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5)of the Finance Act1981.
3. At the conclusion of the hearing we, the Commissioners who heard the appeal, gave our decision orally, to the effect that the appeal succeeded, promising to give our reasons therefor in writing, and on 11 November 1982 we issued our decision in writing. A copy of that decision which sets out the relevant facts, the contentions of the parties and the grounds on which we allowed the appeal is annexed to and forms part of this case.
Example 3, referred to in para. 6.3.3 of the decision and subsequently, has not been included. It has been omitted at the request of the parties in order to preserve confidentiality for another taxpayer not party to these proceedings.
4. The following documents were proved or admitted before us.
1. Formal claim by the appellant for repayment of advance corporation tax dated 5 March 1982.
2. Decision of oil taxation office dated 18 May 1982 refusing repayment.
3. Formal surrenders by Imperial Chemical Industries PLC ("ICI PLC") to the appellant of advance corporation tax, dated 21 May and 4 August 1982.
4. Acceptances of surrenders of ACT by H.M. Inspector of Taxes, dated 9 June and 6 August 1982.
5. Accounts of the appellant for year ended 31 December 1981.
6. Tax computations of the appellant for the year ended 31 December 1981.
7. Computation forming the basis of the appellant's claim for repayment of advance corporation tax.
The above are not annexed hereto as exhibits but are available for inspection by the court if required.
5. Immediately after the determination of the appeal on 11 August 1982 dissatisfaction therewith as being erroneous in point of law was declared to us on behalf of the inspector of taxes and on 8 September 1982 we were required to state a case for the opinion of the High Court pursuant to Taxes Management Act 1970 section 56sec. 56 of the Taxes Management Act 1970 which case we have stated and do sign accordingly.
6. We have been asked to add to para. 9 of our decision, which sets out the Revenue's formal contentions, the following:
It was admitted that this formulation of the right to repayment was not of universal application, and in particular did not provide any guidance in relation to a loss-making company.
7. The question of law for the opinion of the court is whether we have correctly interpreted Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) of the Finance Act 1981 as entitling the appellant, in the circumstances of this case, to repayment of advance corporation tax amounting to £17,635,681.
1. We heard this appeal on 10 and 11 August 1982. The question for determination was whether ICI Petroleum Ltd. ("the appellant") was entitled to repayment of advance corporation tax (hereafter "ACT") amounting to £17,635,681 under the provisions of Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) of theFinance Act 1981, and, if so, when such entitlement arose, and if it was not then so entitled, at what date or in what event it would be so entitled. At the conclusion of the hearing we gave our decision orally (for the reasons indicated in para. 11 below), to the effect that the appeal succeeded, promising to give our reasons therefor in writing.
2.1 The following facts were set out in an agreed statement of facts which was before us at the hearing.
1. This is an appeal by the appellant, a wholly-owned subsidiary of Imperial Chemical Industries PLC ("ICI PLC"), against the decision of the Oil Taxation Office dated 18 May 1982 refusing the appellant's claim under Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5) of the Finance Act 1981 ("Finance Act 1981 section 127 subsec-or-para (5)sec. 127(5)") dated 5 March 1982 for repayment of ACT in the sum of £17,635,681 in respect of the accounting period of the appellant ended 31 December 1981.
2. The appellant was incorporated in England in 1963 and is resident for corporation tax purposes in the United Kingdom. It was originally incorporated under the name of Omega Laboratories Ltd. and was acquired by ICI PLC in 1971. It changed its name in 1973 to ICI Acoustics Ltd. and in 1978 to ICI Petroleum Ltd.
3. ICI PLC's interest in oil and gas exploration began in 1964. Development of the Ninian Field, in which ICI PLC had an interest, commenced in 1974. Those oil extraction activities were, in accordance with the provisions of Oil Taxation Act 1975 section 13sec. 13 of the Oil Taxation Act...
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