R v Commissioners of Inland Revenue, ex parte Unilever Plc and Another
| Jurisdiction | England & Wales |
| Judgment Date | 29 July 1994 |
| Date | 29 July 1994 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Macpherson of Cluny J.
Robert Venables QC and James Kessler (instructed by Beachcroft Stanleys) for the applicants.
Alan Moses QC and Rabinder Singh (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
A-G of Hong Kong v Ng Yuen Shiu ELR[1983] 2 AC 629
Gallic Leasing Ltd v Coburn (HMIT) WLRTAX[1991] 1 WLR 1399; [1991] BTC 451
HTV v Price Commission ICR[1976] ICR 170
National Federation of Self-Employed and Small Businesses Ltd v IR Commrs ELR[1982] AC 617
R v Independent Television, ex parte TSW Broadcasting Ltd (5 February 1992, unreported)
R v IR Commrs, ex parte Matrix Securities Ltd TAX[1994] BTC 85
R v IR Commrs, ex parte MFK Underwriting Agencies Ltd & Ors and related applications WLRTAX[1990] 1 WLR 1545; [1989] BTC 561
R v IR Commrs, ex parte Preston ELRTAX[1985] AC 835; [1985] BTC 208
Corporation tax - Loss relief - Relief not formally claimed within two years of end of relevant accounting period - Late claims accepted by Revenue over a number of years - Whether Revenue's refusal to allow claims out of time unfair - Whether applicants could rely on course of dealing to expect that late claims would be accepted - 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) (replaced by Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2) section 393 subsec-or-para (11)ss. 393(2), (11) of the 1988 Act).
These were applications for judicial review by two members of the Unilever group, seeking a declaration that the Revenue had unfairly refused late claims for loss relief under the Income and Corporation Taxes Act 1970, Income and Corporation Taxes Act 1970 section 177 subsec-or-para (2)s. 177(2) or the Income and Corporation Taxes Act 1988, Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2)s. 393(2). Over a period of some 20 years the Revenue had accepted informal or late claims without challenge, leading the applicants to believe that it was not the policy of the Revenue rigidly to enforce the statutory time-limit.
The Unilever group's worldwide interests were so complex that it took a considerable time to finalise the group's accounts for any given accounting period. For many years therefore the group's practice had been to answer a questionnaire devised by the Revenue giving estimated figures for taxable profits. Estimated assessments were then raised against which the relevant companies appealed and, when the final accounts were prepared, revised assessments would be agreed with the Revenue.
On a number of occasions over a long period, the group's final accounts, formally claiming loss relief against current or earlier accounting periods under the Income and Corporation Taxes Act 1988, Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2)s. 393(2) 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 basis that no valid claim had been made in time.
For the accounting periods ended in the years 1986, 1987 and 1988, the inspector refused claims by the applicants on the grounds that no valid claim was submitted within the statutory time-limit.
The applicants sought judicial review of the Revenue's refusal of the claims on the grounds that in the absence of any prescribed form of claim having been specified by the Revenue, informal claims were sufficient. On receipt of the completed questionnaires, the inspector would have been adequately alerted that a claim for loss relief was to be made and that was all that was required. A valid claim did not have to specify the amount claimed.
Alternatively, even if the claims were not validly made, the applicants contended that the Revenue were bound to treat them as validly made, either because they adopted a course of conduct which led the applicants reasonably to believe that there existed a practice, acceptable to the Revenue, of allowing the Unilever group to make loss relief claims in the manner in which it did, or because the Revenue acquiesced in such practice. Accordingly, it would be unfair in the circumstances to resile from that practice without giving proper notice. The fundamental principle of administrative law applied, namely that a public body such as the Revenue were obliged to exercise their statutory duties reasonably and fairly and not abuse their powers. The Revenue had a discretion to allow late claims under their powers of care and management and should in the circumstances exercise that discretion in favour of the applicants.
The Revenue contended that the completed questionnaires did not contain claims for loss relief. The inspector was not alerted that any such claims were intended until he received the final computations after expiry of the time-limit. Moreover, there had been no such practice as alleged by the applicants, and if there had been, the Revenue's duty was to collect tax according to law whatever the practice had been in the past. Any informal or late claims allowed had been due to oversight or the fact that the particular claims were small and any mere acquiescence in allowing late claims did not amount to a representation, on which the applicants could rely, that late claims were acceptable.
Held, allowing the applications:
1. No relevant claims had been made within the statutory time-limit. The completed questionnaires not only did not contain any figures for loss relief but did not even indicate that losses had been taken into account in the net figures. The inspector would therefore not have been alerted to the fact that loss relief was to be claimed underIncome and Corporation Taxes Act 1988 section 393 subsec-or-para (2)s. 393(2) until the tax computation was received after the two-year time-limit. Gallic Leasing v Coburn Ltd (HMIT) TAX[1991] BTC 451 distinguished.
2. However, the Revenue's acquiescence over a long period amounted to a representation, even if unwittingly, that the time-limit would not be enforced. In the circumstances, a jury would have been persuaded that the whole picture in the present case smacked of abuse of power, and that the Revenue's conduct was unreasonable. The Revenue should exercise their discretion to accept the claims. R V IR Commrs, ex parte Preston TAX[1985] BTC 208 and R v IR Commrs, ex parte MFK Underwriting Agencies Ltd TAX[1989] BTC 561 applied.
Macpherson of Cluny J: Since I do not believe in unnecessary suspense, I indicate at once that these applications succeed. They are combined applications for judicial review made by Unilever plc (Unilever) and Mattessons Wall's Ltd (Wall's). The arguments raised are the same in respect of each company. The accounting years in the Unilever case are 1986, 1987 and 1988. In the Wall's case 1987 and 1988 are involved. Accounts in every case were drawn up to 31 December. In the case of Unilever trading losses were suffered which were considerable:
1986-£9,669,597
1987-£16,500,476
1988-£24,750,175.
In the case of Wall's the trading losses were:
1987-£25,305,403
1988-£19,340,990.
There may be some adjustments to be made to these figures, but they appear to be substantially accepted by the Revenue as proved trading losses.
Where a company suffers a trading loss it may "use" that loss in one of three ways:
(2) The loss may be set off against trading income from the trade in later accounting periods.
(3) The loss may be set off against profits of any description accruing in the same accounting period as the loss.
(4) The loss may be set off against profits of any description in the same accounting period and, within strict limits, earlier accounting periods.
The first set-off is still probably available to the applicants, subject to time-limits. But the applicants wish to set off these losses against same-year profits. The Revenue contend that such set-off is not available to the applicants because no express claim to set off was made within the statutory time-limit, namely within two years after the end of the accounting period in which the loss was suffered.
The applicants' set-off claims are made under Income and Corporation Taxes Act 1970 section 177 subsec-or-para (2)s. 177(2) of the Income and Corporation Taxes Act 1970 (for the years 1986 and 1987) and Income and Corporation Taxes Act 1988 section 393 subsec-or-para (2)s. 393(2) of the Income and Corporation Taxes Act 1988 (for the year 1988). Income and Corporation Taxes Act 1970 section 177 subsec-or-para (10)Section 177(10) of the 1970 Act provides that:
…a claim under Income and Corporation Taxes Act 1970 section 177 subsec-or-para (2)subsection (2) above must be made within two years from the end of the accounting period in which the loss is incurred.
A similar provision is contained in Income and Corporation Taxes Act 1988 section 393 subsec-or-para (11)s. 393(11) the 1988 Act.
It should be noted at once that there is not dispute between the parties that the Revenue has always had a discretion to accept late claims for loss relief, either under the "care and management" provision ofTaxes Management Act 1970 section 1s. 1 of theTaxes Management Act 1970 or under the Finance Act1991 which provides (by Income and Corporation Taxes Act 1988 section 393A subsec-or-para (10)s. 393A(10)) that the period within which a claim must be made may be such further period as the Board (i.e. the Board of Commissioners of Inland Revenue) may allow.
Furthermore, it is accepted that there has never been any statutory provision which requires a claim for loss relief to take any particular form. The commissioners have always had power to determine the form in which such a claim should be made (see Taxes Management Act 1970 section 42 subsec-or-para (5)s. 42(5) of the Taxes...
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