Gallic Leasing Ltd v Coburn (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | Lord Keith of Kinkel,Lord Templeman,Lord Oliver of Aylmerton,Lord Goff of Chieveley,Lord Lowry |
| Judgment Date | 28 November 1991 |
| Judgment citation (vLex) | [1991] UKHL J1128-2 |
| Date | 28 November 1991 |
| Court | House of Lords |
[1991] UKHL J1128-2
House of Lords
Lord Keith of Kinkel
Lord Templeman
Lord Oliver of Aylmerton
Lord Goff of Chieveley
Lord Lowry
My Lords,
I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Oliver of Aylmerton. I agree with it, and for the reasons he gives would allow this appeal.
My Lords,
For the reasons given by my noble and learned friend, Lord Oliver of Aylmerton, I would allow this appeal.
My Lords,
Chapter I of Part XI of the Income and Corporation Taxes Act 1970 contains provisions enabling the company which is part of a group of companies to claim reliefs available to other companies within the group by way of relief from corporation tax for which it is liable. The question at issue in this appeal relates to the form in which such a claim requires to be made if it is to be valid.
The appellant company, Gallic Leasing Ltd., is a wholly owned subsidiary of Gallic Shipping Ltd., a company which had, at the material time, a number of other subsidiaries and which was itself a subsidiary of Gallic Management Ltd. On 1 October 1982 an estimated assessment to corporation tax for the accounting period ended 31 March 1982 was raised upon the appellant. On 31 October 1982 the appellant appealed the assessment and, at the same time, applied to postpone payment of the full amount of the tax claimed, stating as the ground for postponement that "profits will be covered by group relief." On 15 November 1982 the Inspector of Taxes agreed the postponement. On 30 June 1983 the appellant's accountants sent to the inspector for agreement a copy of the appellant's accounts for the period to 31 March 1982 duly signed by the directors together with a computation of its income assessable to corporation tax which was submitted "subject to group relief." Note 6 to the accounts, headed "taxation," stated corporation tax at 52 per cent. of profits of the year as £167,000 from which there was deducted the like sum described as "group relief." At the same time the accountants submitted accounts for the same period of Gallic Management Ltd. Thereafter, on 5 August 1983, accounts were submitted for Gallic Shipping Ltd. On 18 July 1983 the inspector acknowledged receipt of the appellant's accounts and concluded by saying "I have no inquiries to raise and now await details of the group relief." Thereafter nothing further appears to have happened for some eighteen months save that I infer that accounts of other companies in the group for the same accounting year - in particular, West Bay Shipping Ltd., Interflow (Tank Container System) Ltd. and Fairmile Construction Co. Ltd. - were submitted to the inspector for agreement. On 18 January 1985 the inspector wrote to the appellant's accountants agreeing the appellant's profits for the year in question at £321,291 and adding "I should now like particulars of any group relief to be claimed." Subsequently a schedule of group relief was submitted but on 4 December 1986 group relief was formally refused on the ground that "no claim was made within the time limit prescribed by section 246(1)( c) (sic) I.C.T.A. 1970." The reference to section 246 is plainly a misprint for section 264 which provides a two-year time limit for making claims. From this decision the appellant appealed to the general commissioners who upheld the inspector's decision, holding that the references to group relief in the notice of appeal of 31 October 1982, in the note on the accounts and in the accountants' computation of assessable income did not, either severally or collectively, constitute a valid claim to group relief, but amounted to no more than an intimation that group relief would or might be claimed in the future. On appeal to the High Court, Vinelott J., [1989] S.T.C. 354 on 2 March 1989, allowed the appeal holding that in order to make a valid claim to group relief all that was required was for the claimant company to make it clear that a claim was being made and that it was unnecessary to identify either the surrendering companies or the amount of the relief to be surrendered by each. On 13 February 1991 the Court of Appeal [1991] S.T.C. 151 reversed Vinelott J.'s decision, holding that it was essential to a valid claim for group relief that the surrendering companies be identified and the amount of the relief surrendered by each be quantified. From that decision the appellant now appeals to your Lordships' House, leave for that purpose having been obtained on 9 May this year.
The Act of 1970 contains numerous references to the making of claims for reliefs of various kinds, from relief for small maintenance payments (section 65(4)) or trade losses (sections 168, 177) to relief for copyright payments (section 389), relief from tax on delayed remittances (section 419) and double-taxation relief (section 497(4)). At the same time, Parliament provided, in section 42 of the Taxes Management Act 1970, a general code intended to govern the procedure to be employed in making such claims. Section 42(1) provides that where the Taxes Acts provide for relief to be given on the making of a claim, the section shall have effect unless otherwise provided for. Thus every claim is to be made to an inspector (subsection (2)) and provision is made in subsection (3) for an appeal against an inspector's decision. As regards the form or content of any such claim, however, the section leaves this to the determination of the Board of Inland Revenue. Subsection (5) (so far as relevant at all to this appeal) provides as follows:
"A claim shall be in such form as the Board may determine and the form of claim - ( a) shall provide for a declaration to the effect that all the particulars given in the form are correctly stated to the best of the knowledge and belief of the person making the claim, and ( b) may require - (i) A return of profits to be made in support of the claim …"
Section 43 provides that, subject to any longer or shorter period prescribed, no claim is to be allowed unless it is "made" within six years from the end of the chargeable period to which it relates. However, in the determination of how a claim is to be made and when it is to be deemed to be valid or complete, these two sections are in fact totally unhelpful, because, as your Lordships will have been as surprised as I was to learn from Mr. Moses Q.C., speaking on instructions, the power conferred by section 42(5) has never been exercised in the 22 odd years that have elapsed since the Act was passed. Thus, for the determination of what constitutes a "claim" in any given case and when it is to be deemed to have been made, we can effectively put this section on one side and are compelled to rely upon such guidance as is offered by the individual provision for relief to which any alleged "claim" relates.
Group relief was, at the material time, regulated entirely for relevant purposes by sections 258-264 (inclusive) of the Income and Corporation Taxes Act 1970. Section 258(1) provides:
"Relief for trading losses and other amounts eligible for relief from corporation tax may in accordance with the following provisions of this Chapter be surrendered by a company (called 'the surrendering company') which is a member of a group of companies and, on the making of a claim by another company (called 'the claimant company') which is a member of the same group, may be allowed to the claimant company by way of a relief from corporation tax called 'group relief."'
To find out what constitutes a "group" for the purposes of the section, reference has to be made to subsection (5)( a) which provides that two companies shall be deemed to be members of a group of companies if one is the 75 per cent. subsidiary of the other or both are 75 per cent. subsidiaries of a third company.
Thus group relief is, by definition, the allowance to one company, the claimant, by way of relief against its liability for corporation tax of the reliefs by way of trading losses or otherwise of another company to which the claimant stands in the relation postulated by subsection (5), which reliefs are surrendered by that other company. That allowance is permitted "on the making of a claim" by the claimant and that expression clearly invokes section 42 of the Taxes Management Act 1970. It tells us, however, nothing more...
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