Lord Advocate v Butt
| Jurisdiction | Scotland |
| Judgment Date | 21 November 1990 |
| Date | 21 November 1990 |
| Court | Court of Session (Outer House) |
Court of Session (Outer House).
Lord Prosser.
Mr J W McNeill (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr Colin Tyre (instructed by John G Gray & Co) for the taxpayers.
The following cases were referred to in the opinion:
Hutcheson & Co's Administrator v Taylor's Executrix 1931 SC 484
Lord Advocate v Hepburn TAX[1990] BTC 250
Income tax - Time limit for commencement of proceedings for recovery of tax - Claims by Revenue for tax due and interest - Whether claims defeated by prescription - section 6 subsec-or-para (1) schedule 1 subsec-or-para 1 schedule 1 subsec-or-para 1Prescription and Limitation (Scotland) Act 1973, sec. 6(1), . 1, para. 1(a)(i), (f).
This was an action on behalf of the Inland Revenue for recovery of tax due and interest which was defended on the ground that under the provisions of the Prescription and Limitation (Scotland) Act 1973, the sums claimed were not recoverable.
The partners in a firm were assessed to Sch. D tax for the three years 1979-80 to 1981-82. Each of the assessments was appealed against. The assessment for the first year was confirmed and the assessments for the other two years were determined by agreement under the Taxes Management Act 1970 section 54Taxes Management Act 1970, sec. 54. Part of the amount of each assessment was paid.
In October 1989 the Crown sued for the balance due under the assessments with interest.
The taxpayers contended that, since the obligation to pay tax had subsisted for a continuous period of five years without any claim being made and without any acknowledgment, the obligation was extinguished by virtue of section 6sec. 6 of the 1973 Act. The receipt of income and the statutory charging provisions together amounted to an "obligation of accounting" which was rendered enforceable by an assessment. Therefore, the obligation was within schedule 1 subsec-or-para 1. 1, para. 1(1)(f) of the 1975 Act, which applied section 6sec. 6 to "any obligation of accounting". Further, no interest was due either as a result of the prescription of the primary obligation or because the liability to pay interest was itself extinguished under schedule 1 subsec-or-para 1. 1, para. 1(1)(a) which specifically applied the provisions of section 6sec. 6 to "interest".
It was common ground that the relevant period of five years had expired. The sole question was whether section 6sec. 6applied.
Held, granting decree de plano in favour of the Crown for the principal sums and for interest from 9 October 1984 but not before that date:
1. There was a distinction between an obligation to account for any sums and an obligation to pay. The obligation sought to be enforced was an obligation to pay tax, not an obligation to account, so that schedule 1 subsec-or-para 1. 1, para. 1(1)(f) did not apply to bring section 6sec. 6 into operation.
2. Interest on unpaid tax fell within schedule 1 subsec-or-para 1. 1, para. 1(1)(a). Accordingly the obligation to pay interest accruing before 9 October 1984 was extinguished, being five years before the action was commenced on 9 October 1989.
Lord Prosser: The pursuer is the Lord Advocate, suing on behalf of the Commissioners of Inland Revenue. The defenders are the whole former partners of a now dissolved firm. It is a matter of admission that the defenders were assessed to income tax (. D) in respect of the three income tax years 1979-80 to 1981-82. Each of the assessments was appealed against, that for 1979-80 being confirmed, and those for the other two years being determined in accordance with the provisions of Taxes Management Act 1970 section 54sec. 54 of the Taxes Management Act 1970 by certain reductions. Certain payments to account of the tax payable under each of these assessments are acknowledged to have been made, and by his first conclusion the pursuer seeks payment of the balance which is alleged to remain payable in respect of each assessment. By his second conclusion, the pursuer seeks a sum in respect of the aggregated interest claimed to be payable by the defenders in respect of the balances allegedly due from time to time from the reckonable dates applicable to the assessments in question until 6 July 1989. Interest accruing from that date onwards until payment is sought under the first conclusion. By his third conclusion, the pursuer seeks a sum claimed to be due in respect of Class 4 contributions due under the Social Security Act 1975.
At procedure roll, it was argued on behalf of the defenders that any obligation incumbent on them to make payment of the sums first and third concluded for had prescribed, and that so far as the interest sought under the second conclusion was concerned, it was either not due (as a result of the prescription of the primary obligations) or that it itself related to an obligation which had prescribed. On behalf of the pursuer, it was contended that there was no relevant defence, and that I should grant decree de plano in terms of all three conclusions. It was common ground that the position in relation to the Class 4 contributions would be the same as the position in relation to the Sch. D assessments, and that accordingly the fate of conclusion 3 would be the same as conclusion 1.
section 6 subsec-or-para (1)Section 6(1) of the Prescription and Limitation (Scotland) Act 1973 provides that if an obligation to which the section applies has subsisted for a continuous period of five years, without any relevant claim having been made in relation to the obligation, and without the subsistence of the obligation having been relevantly acknowledged, then as from the expiration of that period the obligation shall be extinguished. This provision is the foundation of the argument for the defenders, both in relation to the claim for principal sums and relation to the claim for interest. If the section applies to any of the obligations here in question, it was not suggested on behalf of the pursuer that the required period of five years had not expired, or that there had been a relevant claim or relevant acknowledgment interrupting prescription. The sole issue in relation to each obligation is therefore whether it is indeed an obligation to which the section applies.
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Lord Advocate v Butt
...1, para. 1(a)(i). This was a reclaiming motion by the Revenue appealing against a decision of the Outer House of the Court of Session ([1991] BTC 59)that interest on unpaid tax accruing five years or more before commencement of proceedings for recovery of tax fell within the section 6 sched......