R (on the application of Imperial Chemical Industries Ltd and Another) v Revenue and Customs Commissioners and Another
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Whipple |
| Judgment Date | 17 February 2016 |
| Neutral Citation | [2016] EWHC 279 (Admin) |
| Docket Number | Case No: CO/5523/2015 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 17 February 2016 |
[2016] EWHC 279 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Whipple
Case No: CO/5523/2015
Daniel Margolin QC (instructed by Joseph Hage Aaronson LLP) for the Claimants
Elizabeth Wilson, Andrew MacnabandAparna Nathan (instructed by The General Counsel and Solicitor to HM Revenue and Customs) for the Defendants
Hearing date: 3 February 2016
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction:
The Claimants apply for permission to bring a judicial review of the Treasury and HM Commissioners for Revenue and Customs (the "Commissioners"). The Claim Form was lodged on 11 November 2015 and was issued the next day. By it the Claimants seek judicial review of the Restitution Interest Tax Provisions ("RITP") which were brought into effect from 26 October 2015 by a resolution laid on 23 October 2015 under the Provisional Collection of Taxes Act 1968. The provisions are contained in Part 8C of the Corporation Tax Act 2010, as amended by the Finance (No 2) Act 2015.
This claim arises against a background of the Franked Investment Income Group Litigation Order ("FII GLO"), litigation which has been on foot since October 2003, commenced in the Chancery Division of the High Court, and which is not yet concluded finally. That litigation is helpfully summarised by Henderson J at paragraphs 1–3 of " FII (HC 2)" in 2014, [2014] EWHC 4302 (Ch), [2015] STC 1471. I shall not repeat the details of it here.
Both of the Claimants in this judicial review are parties to the FII GLO. Each of them has received an interim payment of restitution interest reflecting the taxpayers' success to date in the FII GLO. The First Claimant ("ICI") received £22 million in 2009, the Second Claimant ("FCE") received £41 million in 2015. Both Claimants recognised these payments in their accounts for the years ending 31 December 2009, in the case of ICI, and 31 December 2014, in the case of FCE (with such caveats as were considered necessary from an accounting perspective to reflect the provisional nature of the receipts). Both accounted for tax on the payments on the basis of the tax legislation prevailing at the time of receipt.
The legislation:
It is not necessary for present purposes to detail the RITP. It is sufficient that I note the key features, in summary:
a) The RITP provide for corporation tax at 45% on restitution interest, which is interest defined by reference to a number of conditions. There are no reliefs or set-offs against this tax.
b) Condition (A) is that the interest is paid or payable in respect of a claim by a taxpayer for restitution on grounds of a mistake of law relating to a taxation matter or the unlawful collection of tax.
c) Condition (B) is that the court has made a final determination that the Commissioners are liable to pay the interest, or have entered into a final settlement of the claim under which the taxpayer company is entitled to interest.
d) Condition (C) is that the interest is not simple interest at a statutory rate.
e) On making a payment of interest which meets certain other conditions a deduction must be made on account of the tax. The amounts withheld in this way are to be treated as paid by the taxpayer on account of its liability to corporation tax on the interest payment as restitution interest. A notice must accompany the payment showing the gross amount of the payment and the amount withheld on account of tax.
f) The Commissioners can assess amounts chargeable to tax under the RITP in which event the company must pay the amount assessed within 30 days.
g) There is a right of appeal against any assessment or withholding to the First Tier Tribunal (Tax Chamber) (the "FTT").
The effect of these provisions is to impose a tax on compound interest payments paid by the Commissioners, which becomes due at the point that (and only if) the court finally determines compound interest to be payable by the Commissioners or any final settlement to that effect is reached. The collection mechanism will depend on the date of payment of the interest. If payments (on account or final) are made following the introduction of the RITP, they will be subject to a withholding. If payments have been made on account before the introduction of the RITP, they will be subject to an assessment.
The Claimants' circumstances
ICI was paid compound interest by way of interim payment (in 2009). FCE was paid compound interest following the FII Quantification Trial (in 2014): [2014] EWHC 4302 (Ch), [2015] STC 1472. But the FII litigation is not yet concluded (and is unlikely to be concluded, finally, for some years yet). In consequence, both Claimants are potentially liable to pay tax under the RITP, if the FII GLO is finally resolved in the taxpayers' favour. Neither Claimant has received an assessment to the tax, and in consequence neither has a right of appeal to the FTT in relation to this potential liability to tax. However, to complete the picture, I am told that ICI has recently received or is shortly to receive a further payment in relation to compound interest under the FII GLO, which payment will be subject to withholding, and in relation to which ICI will have a right of appeal to the FTT.
The chronology of litigation
The Claimants lodged a Claim Form on 11 November 2015. The following 5 propositions are advanced at [2.7] of the Grounds:
1) The Restitution Interest Tax Provisions violate the UK's obligations under EU law to provide the Claimants with an adequate and effective remedy in respect of taxes unlawfully levied contrary to the principle of effectiveness and Article 47(1) CFREU.
2) They also contravene the established EU law and ECHR law principles of legal certainty, non-retroactivity and the protection of legitimate expectations.
3) By seeking to reverse the effect of final judicial rulings as to the appropriate and necessary remedy, the Restitution Interest Tax Provisions constitute an unjustified interference by the State in judicial proceedings contrary to general principles of EU law and ECHR law, including the rule of law and the requirement of separation of powers, and contrary to Article 6 ECHR and Article 47(2) CFREU.
4) The Restitution Interest Tax Provisions are contrary to Article 1 of Protocol 1 to the ECHR (" A1P1") and Article 17 CFREU.
5) The Restitution Interest Tax Provisions are discriminatory and contravene Article 14 ECHR."
Those grounds are expanded at [8.3] – [8.42].
Relief of various sorts is sought, but the Claimants' main focus is on declaratory relief, to the effect that the RITP are unlawful, being incompatible with EU law and/or the Convention. So far as the Convention grounds are concerned, the Claimants seek a declaration of incompatibility. It is also suggested that any doubt in EU law should be resolved by a reference to the Court of Justice of the European Union.
In addition to substantive relief, the Claimants sought interim relief by means of a stay of the RITP pending the outcome of this judicial review.
When they issued their Claim Form, the Claimants also sought expedition in the form of consideration of the Claim within 7 days of lodging, abridgment of time for the Commissioners to lodge their Acknowledgement of Service to 3 days (from the standard 21 days), that the application for interim relief should be considered by the Court within 21 days, that permission should be considered by the Court within 21 days, and if granted, that the judicial review should be disposed of on or before 31 January 2016. It was said that the urgency was consequent on
".. the immediate and continuing prejudicial impact of the [RITP] on the Claimants' business and affairs and the conduct of their claims in the FII GLO …. In short, the unique prospect, if the [RITP] are lawful, of a tax charge potentially arising at an uncertain date in the future but then being backdated to an accounting period in the past gives rise to serious accounting issues and may cause severe commercial and reporting difficulties." (cf [7] of the Reasons for Urgency on the Form N463).
Simler J made no order on the application for expedition when she reviewed the papers on 18 November 2015, and permitted the Defendants the usual period of 21 days to submit their Acknowledgement of Service, following which she directed that the papers were to be put before a Judge as soon as possible to consider permission. The Defendants lodged their Acknowledgement of Service on 2 December 2015.
In answer, the Claimants lodged a supplemental note (plus a further ring binder of evidence) on 4 December 2015.
The matter came before me on the papers on 22 December 2015. By this stage, there were around 5 lever arch files of authorities lodged, together with a similar number of files of documents. Meanwhile the Claimants' solicitors had corresponded extensively with the Court on expedition and other things; those letters had been answered by the Commissioners' representatives, and where required by the Court itself.
I made no order on the Claimants' application for expedition and ordered the application for permission to be adjourned to an oral hearing for one day, with directions, saying that...
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