R v Commissioners of Inland Revenue, ex parte Unilever Plc and Another
| Jurisdiction | England & Wales |
| Judgment Date | 13 February 1996 |
| Date | 13 February 1996 |
| Court | Court of Appeal (Civil Division) |
Sir Thomas Bingham MR, Simon Brown and Hutchison L JJ.
Court of Appeal (Civil Division).
Corporation tax - Loss relief - Relief not formally claimed within two years of end of relevant accounting period - Late claims accepted by Revenue over many years - Whether Revenue's refusal to allow claims out of time unfair - Whether previous acceptance of late claims entitled taxpayers to expect that late claims would be accepted - Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2) section 393 subsec-or-para (11)Income and Corporation Taxes Act 1988, ss. 393(2), (11) (Income and Corporation Taxes Act 1970 section 177 subsec-or-para (2) section 177 subsec-or-para (10)Income and Corporation Taxes Act 1970, ss. 177(2), (10)) (Income and Corporation Taxes Act 1970 section 393 subsec-or-para (2) section 393 subsec-or-para (11)ss. 393(2) and (11) were repealed by theFinance Act 1990Finance Acts 1990 and Finance Act 19911991 respectively).
This was an appeal by the Revenue against a decision of Macpherson of Cluny J ([1994] BTC 362) that the Revenue's acquiescence in accepting late claims for loss relief over many years amounted to a representation that the time limit imposed by the Income and Corporation Taxes Act 1988 section 393 subsec-or-para (11)Income and Corporation Taxes Act 1988, s. 393(11) for making claims under Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2)s. 393(2) would not be enforced and to refuse the claims at this late stage was an abuse of power.
The Unilever group's worldwide interests were so complex that it took a considerable time to finalise the group's accounts for any given period. For many years therefore the group's practice had been to submit estimated figures in the form of a schedule devised by the Revenue. In order to take advantage of same year loss relief, estimated losses were offset against estimated profits, but it was not possible by looking at the schedules to know which profit figures were shown net of loss. On receiving the completed schedules the Revenue would raise assessments based on the information provided and Unilever would pay the tax assessed.
At a later date Unilever would submit the final accounts for each company and a detailed tax computation. The Revenue would review the accounts and the tax computation against the estimated figures in the schedule and make any necessary adjustments. The tax computation would show where trading losses had been deducted thereby making it plain that the relevant company was taking the benefit of loss relief. The procedure worked harmoniously over a 20-year period.
On at least 30 occasions over the years, the group's final accounts, formally claiming loss relief under the Income and Corporation Taxes Act 1988Income and Corporation Taxes Act 1988 or its predecessor, were submitted more than two years after the end of the accounting period in question. The relief had never been challenged on the ground that no valid claim had been made in time. Then, for the accounting periods 1986, 1987 and 1988, claims were refused.
Two members of the Unilever group sought judicial review of the Revenue's decision on the grounds that, since no prescribed form of claim had been specified by the Revenue, informal claims were sufficient. The inspector would have been alerted by the completed schedules that a loss relief claim was to be made and that was all that was required.
Alternatively, even if the claims were not validly made, they should be so treated, either because the Revenue had led Unilever over many years to believe that it was the Revenue's practice to accept late claims, or because the Revenue had acquiesced in accepting the claims. In the circumstances, it would be unfair and an abuse of power to refuse the relief without giving proper notice. The Revenue should exercise its discretion to accept the late claims for loss relief.
The Revenue contended that no clear, unambiguous or unqualified representations that late claims would be accepted had been made which could have given rise to an estoppel in private law. Therefore it was not unfair for the Revenue to fulfil their obligation to collect taxes and there was no abuse of power. Alternatively, it had to be shown that the Revenue had knowingly acquiesced in or waived a failure by Unilever to comply with the time limit. The evidence was that the Revenue had simply failed to notice that the claim was late. Moreover, there were no exceptional circumstances to render the decision to enforce the time limit unfair.
Unilever contended that a sufficient claim had been made in the completed estimated profit schedules. Alternatively, the Revenue were under a duty to act fairly; the categories of unfairness were not closed; and the courts had not previously had occasion to consider facts analogous to the present case. Not to take account of the trading losses would be offensive to ordinary notions of fiscal fairness.
Further, the time limit was only regulatory and the strict imposition of the two-year rule was pointless in this instance. Neither Unilever nor the Revenue had noticed the 30 late claims which had not affected the Unilever's liability or the efficient collection of taxes for 20 years. Unilever was seriously prejudiced by the fact that the claim was refused at a late stage and the additional tax, amounting to £17m, claimed by the Revenue would be an adventitious windfall which had accrued through an understandable error of an honest and compliant taxpayer.
Held, dismissing the Revenue's appeal:
1. No relevant claim for loss relief had been made in completing the schedules provided by the Revenue. The Revenue's attention was not drawn to the fact that a loss relief situation existed or that a claim was to be made. Gallic Leasing Ltd v Coburn (HMIT) TAX[1991] BTC 451 applied.
2. On the unique facts of the case, to reject Unilever's claims without clear and general advance notice would be so unfair as to amount to an abuse of power. In all save the most exceptional circumstances the Revenue would be the best judge of what was fair, but the circumstances in the present case were exceptional. No decision maker fully and fairly applying his mind to the history could have concluded that the interests of the public or the Revenue's acknowledged duty to act fairly would be vindicated by a refusal to exercise discretion in favour of Unilever.
3. Per Simon Brown LJ: although Unilever had not established that the Revenue had made a clear and unambiguous representation that late claims would be accepted, to confine all fairness challenges to established categories of unfairness would impose an unwarranted fetter on the broader definition of an unlawful administrative decision. Nor was it necessary that the conduct in question offended some equivalent private law principle. Unfairness which had amounted to an abuse of power was not unlawful because it amounted to a breach of some equivalent private law principle: R v IR Commrs, ex parte PrestonTAX[1985] BTC 208 and CCSU v Minister for Civil Service [1985] AC 374 applied. R v IR Commrs, ex parte MFK Underwriting Agencies Ltd TAX[1989] BTC 561 explained.
The following cases were referred to in the judgment:
Associated Provincial Picture Houses Ltd v Wednesbury CorpELR[1948] 1 KB 223
Council of Civil Service Unions v Minister for the Civil ServiceELR[1985] 1 AC 374
Gallic Leasing Ltd v Coburn (HMIT) WLRTAX[1991] 1 WLR 1399; [1991] BTC 451
HTV Ltd v Price Commission ICR[1976] ICR 170
R v IR Commrs, ex parte Matrix Securities Ltd WLRTAX[1994] 1 WLR 334; [1994] BTC 85
R v Independent Television Commission, ex parte TSW Broadcasting LtdUNK(unreported, 26 March 1992)
R v IR Commrs, ex parte MFK Underwriting Agencies Ltd WLRTAX[1990] 1 WLR 1545; [1989] BTC 561
R v IR Commrs, ex parte Preston ELRTAX[1985] AC 835; [1985] BTC 208
R v Jockey Club, ex parte RAM Racecourses Ltd UNK[1993] 2 All ER 225
R v Secretary of State for Education, ex parte London Borough of Southwark [1995] ELR 308
R v Tower Hamlets LBC, ex parte Chetnik Developments Ltd ELR[1988] AC 858
Scandinavian Trader Tanker Co AB v Flota Petrolera Equatoriana (The Scaptrade) ELR[1983] QB 529
United Scientific Holdings Ltd v Burnley Borough Council ELR[1978] AC 904
Woolwich Equitable Building Society v IR Commrs ELRTAX[1993] AC 70; [1992] BTC 470
Alan Moses QC and Rabinder Singh (instructed by the Solicitor of Inland Revenue) for the Crown.
Robert Venables QC, James Kessler and Amanda Hardy (instructed by Beachcroft Stanleys) for Unilever.
Sir Thomas Bingham MR: These appeals concern two companies, one of them for three accounting years and the other for two. Because of legislative changes, the statutory provisions governing the two earlier accounting years differ from those governing the third. But the problem is in each instance almost exactly the same, and can conveniently be described by taking one company (Unilever plc) for one accounting year (the 12-month period which ended on 31 December 1988).
Income and Corporation Taxes Act 1988 section 6Section 6 of the Income and Corporation Taxes Act 1988 ("the 1988 Act") provided that corporation tax should be charged on the profits of companies. Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2)Section 393(2) of the 1988 Act provided (subject to qualifications not here relevant) that where in an accounting period ending after 5 April 1988 a company carrying on a trade incurred a loss in the trade, the company might make a claim requiring that the loss be set off for the purposes of corporation tax against profits of whatever description of that accounting period.Taxes Management Act 1970 section 42Section 42 of theTaxes Management Act 1970 ("the 1970 Act") empowered the Board of Inland Revenue to prescribe the form in which such a claim should be made, but it has never done so...
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