R v Commissioners of Inland Revenue, ex parte Barker and Another
| Jurisdiction | England & Wales |
| Judgment Date | 22 June 1994 |
| Date | 22 June 1994 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Latham J.
Kevin Prosser and Rupert Baldry (instructed by Howes Percival, Ipswich) for the applicants.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following case was referred to in the judgment:
Pepper (HMIT) v Hart and related appeals ELRTAX[1993] AC 593; [1992] BTC 591
Income tax - Interest on tax due - Assessment in agreed amount - Subsequently taxpayers ceased trading and assessment amended in accordance with closing provisions - Actual receipts in last year of trading exceeded original assessment - Whether interest payable from date applicable to original assessment when the final amount could not have been known or assessed - Whether date from which interest ran could be the subject of judicial review proceedings - Taxes Management Act 1970 section 54 section 86Taxes Management Act 1970, ss. 54, 86.
This was an application for judicial review of the Revenue's decision that where an assessment under appeal was amended to take account of a change in circumstances after the assessment was made, interest on unpaid tax pursuant the Taxes Management Act 1970 section 86Taxes Management Act 1970, s. 86 was to be calculated as from the date of the original assessment.
The applicants were the trustees of substantial estates trading as a farming business and selling land. On 4 April 1990 they ceased trading, having disposed of the land, and informed the inspector of the fact on 5 April.
An estimated assessment had been raised for the year 1988-89 on 1 December 1988 against which the applicants had appealed. Had they continued to trade the Sch. D profits would have been based on the previous year. In fact, the actual profits for the year, chargeable under the closing provisions, amounted to nearly £5.5m, a great deal more than the estimated amount.
The inspector then amended the 1988-89 assessment to the increased amount. After correspondence with the inspector as to the date from which interest under the Taxes Management Act 1970 section 86Taxes Management Act 1970, s. 86 would run, the Inland Revenue Accounts Office, in a letter dated 17 July 1992, confirmed the Revenue's view that interest would run from 1 July 1989 in accordance with Taxes Management Act 1970 section 86 subsec-or-para (4)s. 86(4) (in the circumstances, the 1 July following the end of the year of assessment).
The applicants, in proceedings for judicial review, challenged the decision contained in the Revenue's letter of 17 July 1992.
They contended that the inspector had no power to amend the original assessment but should have raised an additional or further assessment. As a result, the purported amendment provided no basis for charging interest. The correspondence evidenced a contractual obligation to pay the relevant sum by way of tax without carrying with it any consequences under the statutory provisions.
The applicants further contended that Taxes Management Act 1970 section 86s. 86, on its proper construction, could not require payment of interest from a date when the liability to tax as ultimately determined after the cessation of trading could not have been known since at that time the basis of assessment was different. The event on which the 1988-89 liability to tax depended did not occur until 4 April 1990. It was said to be wholly inappropriate for interest to be charged for a period before the date on which the event occurred which gave rise to the increased incidence of tax and the amount could not have been identified. Moreover, if the applicants had not appealed against the original assessment but had paid the tax assessed, the inspector would have had to raise a further assessment as a result of the cessation of trading and interest would have run from a date determined in relation to that further assessment and it was unfair that the mere existence of an appeal should increase a liability for interest.
The Revenue contended that the amendment to the original assessment, against which an appeal had been made, was lawful pursuant to an agreement which the inspector was empowered to make under the Taxes Management Act 1970 section 54Taxes Management Act 1970, s. 54. The consequence of that agreement was that it was to be treated as if the appeal commissioners had determined the appeal in the manner agreed. As a result, interest fell to be calculated as if the assessments had been varied on appeal in May 1991, and on the plain words of the Taxes Management Act 1970 section 86Taxes Management Act, s. 86, the applicants were liable for interest from 1 July 1989.
The Revenue further contended that judicial review was an inappropriate remedy because Taxes Management Act 1970 section 86s. 86 merely gave rise to a debt which involved no point of public law.
Held, dismissing the application:
1. There was a clear power to amend or vary the assessment pursuant to Taxes Management Act 1970 section 54s. 54. The fact that the assessment was originally made on the preceding year profits basis, and was in fact amended to take account of the changed basis which fell to be assessed was irrelevant. The assessment still related to the same period, and by the time of the agreement tax fell to be assessed on the actual profits basis. That would have been the situation confronted by the commissioners had they been required to deal with the appeal. In those circumstances, in spite of any apparent unfairness, the agreement could not be construed as anything other than the settling of an appeal by agreement pursuant to Taxes Management Act 1970 section 54s. 54 with the consequences prescribed by that provision.
2. Judicial review was not the appropriate forum. The issue relating to interest did not raise any question of public law. While the construction of a statute was involved, the consequence of the construction of the statute was simply to determine the basis of the calculation of a debt, a matter of private law which could have been raised by way of defence to an action brought by the Revenue or by an originating summons to deal with the dispute as to interpretation.
Latham J: In this application the applicants, who are trustees of the Brooke Hall and Bixley Farm Estates, challenge what is described as a decision by the Commissioners of Inland Revenue to claim interest on income tax contained in a letter dated 17 July 1992 from the Inland Revenue Accounts Office in the sum of £116,535.68, being the interest said to be due and owing on an assessment to tax raised under Sch. D for the tax year 1988-89.
The applicants traded until 4 April 1990, as I understand it as a farming business and selling land, and on 5 April 1990 informed the relevant inspector of taxes that they had ceased their trading activities, having disposed of the trading stock, that is the land on which the trading activities had taken place. By then, an assessment had been raised by the inspector for the tax year 1988-89 on 1 December 1988. An appeal was entered in respect of this assessment on behalf of the applicants on 30 December 1988 on the grounds that it was an estimated assessment which would require adjustment. Had the applicants continued to trade, the tax in fact payable would have been charged, pursuant to Sch. D, on the profits for the previous year. In fact, the actual profit for the...
To continue reading
Request your trial
-
Glaxo Group Ltd and Others v Commissioners of Inland Revenue
...TAXTAX(1984) 58 TC 218; [1984] BTC 395 R v Brixton Income Tax Commrs & Anor TAX(1913) 6 TC 195 R v IR Commrs, ex parte Barker & Anor TAX[1994] BTC 290 R v Special Commrs, ex parte Elmhirst TAX(1935) 20 TC 381 Royal Bank of Canada v IR Commrs ELR[1972] Ch 665 St Aubyn v A-G ELR[1952] AC 15 V......