R v Special Commissioners, ex parte Fina Exploration Ltd

JurisdictionEngland & Wales
Judgment Date08 November 1991
Date08 November 1991
CourtQueen's Bench Division

Queen's Bench Division (Crown Office List).

Hodgson J.

R
and
Special Commrs, ex parte Fina Exploration Ltd

Mr Peter Whiteman QC and Miss Marion Simmons (instructed by the Legal Department, Fina plc) for the applicant.

Mr Launcelot Henderson (instructed by the Solicitor of Inland Revenue) for the Crown.

The following cases were referred to in the judgment:

Mobil North Sea Ltd v IR Commrs TAX[1987] BTC 8074

Scorer (HMIT) v Olin Energy Systems Ltd TAXTAX[1984] BTC 39 (CA); [1985] BTC 181 (HL)

Petroleum revenue tax - Administration - Appeal against assessment - Jurisdiction of special commissioners to give leave for late appeal - Whether abandonment of appeal to special commissioners nullified appeal as if no appeal had been lodged - Appeals settled by agreement - Whether assessments amended conferring a right of appeal - Whether taxpayer could bring fresh appeal on different point - Taxes Management Act 1970 section 49 subsec-or-para (1)Taxes Management Act 1970, sec. 49(1); Oil Taxation Act 1975 schedule 2 subsec-or-para 12 schedule 2 subsec-or-para 12 schedule 2 subsec-or-para 14Oil Taxation Act 1975, Sch. 2, para. 12(1), (3), 14(9).

This was an application for judicial review seeking a declaration that a special commissioner should have heard an application by Fina Exploration Ltd ("the applicant") for leave to appeal to the special commissioners out of time pursuant to the Taxes Taxes Management Act 1970 section 49 subsec-or-para (1)Mangagement Act 1970, sec. 49(1) against assessments or determinations for petroleum revenue tax under the Oil Taxation Act 1975.

The applicant was an oil company, one of five participators in the Maureen field in the North Sea. It appealed against assessments to petroleum revenue tax for certain six-month chargeable periods from 1983. Those appeals, which concerned the valuation of sales, were in due course either withdrawn or settled in agreed amounts.

As a result of the case of IR Commrs v Mobil North Sea LtdTAX[1987] BTC 8074 which was proceeding through the courts and was eventually decided by the House of Lords in 1987, it was thought that an increased amount of "uplift" (expenditure supplement under theOil Taxation Act 1975 section 2Oil Taxation Act 1975, sec. 2) should have been allowed in the periods in question. A special commissioner consented to late appeals under the Taxes Management Act 1970, Taxes Management Act 1970 section 49 subsec-or-para (1)sec. 49(1) on the uplift point by the four other participators in the Maureen field but refused to consider whether the applicant might make late appeal applications on the uplift point on the grounds that where appeals had been abandoned under the Oil Taxation Act 1975 schedule 2 subsec-or-para 14Oil Taxation Act 1975, Sch. 2, para. 14(8) or settled by agreement under Oil Taxation Act 1975 schedule 2 subsec-or-para 14para. 14(9), any further appeal was precluded.

The issue was whether, for certain specified six-month chargeable periods from 1983 onwards, the special commissioners had jurisdiction to determine late appeals against assessment to petroleum revenue tax under the Taxes Management Act 1970, Taxes Management Act 1970 section 49 subsec-or-para (1)sec. 49(1) which was applied for the purposes of petroleum revenue tax by Oil Taxation Act 1975 schedule 2 subsec-or-para 1Sch. 2, para. 1 to the 1975 Act.

The applicant contended in relation to the chargeable periods for which the appeals had been abandoned that the position was as if no appeal had been made. The abandoned appeals were a nullity so that further appeals were not inhibited. The omission of any reference in Oil Taxation Act 1975 schedule 2 subsec-or-para 14para. 14(8) to abandonment being the equivalent of a determination by the appeal commissioners (compare Taxes Management Act 1970 section 54 subsec-or-para (4)sec. 54(4) of the Taxes Management Act 1970) meant that a further appeal on a different ground was not precluded.

Where an agreement was reached, the applicant contended that the correct procedure was for the Board to make an amendment under Oil Taxation Act 1975 schedule 2 subsec-or-para 12Sch. 2, para. 12(1) reflecting the terms of the agreement and to serve a notice under Oil Taxation Act 1975 schedule 2 subsec-or-para 12para. 12(3), which, by applying Oil Taxation Act 1975 schedule 2 subsec-or-para 10para. 10(5), carried with it a right of appeal against any such amendment. Accordingly, in relation to the chargeable periods where agreement had been reached, an appeal on different grounds might be entertained.

Held, refusing the application for judicial review:

The special commissioner was right to refuse to entertain an application to appeal out of time. The purpose of the legislation was to achieve finality and to accept the taxpayer's arguments would defeat that purpose.

JUDGMENT

Hodgson J: Fina Exploration Ltd seeks judicial review of a decision of the commissioners for the special purposes of the income tax Acts given on 18 January 1991. For four days prior to 18 January the commissioners heard applications from five companies for leave to appeal out of time against assessments under the oil tax legislation. The five companies are the participants in the Maureen field in the North Sea. The reason they sought leave to appeal out of time was the decision of the House of Lords given on 9 July 1987 in Mobil North Sea Ltd v IR Commrs TAX[1987] BTC 8074. Arguably that decision, the details of which do not need consideration by me, means that tax has been assessed against the five companies at too high a level. The other four companies were granted leave to appeal out of time, as was the applicant in respect of two periods, 1985/1 and 1985/2 but the applicant was refused leave in respect of the other periods for which leave to appeal was sought. For the purposes of oil tax, periods of assessment and determination are six-monthly ones and the nine periods with which I am concerned are 1983-2, 1984-1, 1984-2, 1986-1, 1986-2, 1987-1, 1987-2, 1988-1 and 1988-2.

The reason why the applicant was unsuccessful was, shortly, that it had made appeals in time against the determinations or assessments in those periods, some of which had been withdrawn or abandoned, some of which had been settled by agreement. These appeals of the applicant had been on quite different grounds from those which led to the decision of the House of Lords to which I have referred.

The commissioner gave reasons for his decision in these words:

I am asked to accept applications for admission of late appeals by Petrofina in relation to appeals against assessments under the Oil Taxation Legislation for chargeable periods 1983/2; 1984/1; 1984/2; 1986/1 and subsequent years, notwithstanding the common agreement between the parties that appeals were made in time in relation to each of these assessments. This is not a question which should have been put to me at all. The Board were correct in declining to entertain the applications. The Board should have stood on their refusal leaving the applicants to apply for judicial review of the Board's decision. I will take the only course open to me. I have decided I am not competent to entertain the applications and therefore I refuse to accept jurisdiction. I therefore put into the hands of the applicants the possibility to apply for mandamus should they wish to do so. I have not dealt with the merits of the applications. In my view they should not be before me. I would also mention that this matter should be considered by a higher tribunal, since it is a matter which should receive publicity which this Tribunal cannot give it.

Taxation on profits derived from the exploration and exploitation of the oil fields in the sea areas allocated to the UK under international agreement is the subject of special provisions contained in the Oil Taxation Act 1975. The scheme is self contained and very different from that of the other main forms of taxation - income tax, capital gains tax and corporation tax. I am told that even by tax law standards it is an immensely complicated scheme. Fortunately I do not need to concern myself with many of its details.

The main outlines of the scheme are these. The year is divided into two six-month chargeable periods. The tax is on the assessable profit accruing in any chargeable period and the tax is calculated by deducting allowable losses from assessable profits, a sum which leads either to an assessment where tax is payable or a determination where losses exceed profits. By Oil Taxation Act 1975 section 2sec. 2 the concepts of positive and negative amounts are introduced. To encourage exploration the scheme provides for a percentage uplift on some forms of expenditure. The decision of the House of Lords perhaps means that the five participants should have been allowed a greater uplift than they were in fact given. The four other participants have leave so to argue but, save for two of the 11 periods, the applicant has been denied leave to do so. The appeals of the applicant were in no way concerned with uplift. The dispute with the Board on those appeals was an on-going one as to the valuation of certain sales.

The management of the three main taxes is, of course, provided by theTaxes Management Act 1970. The management of petroleum revenue tax is provided for in Oil Taxation Act 1975 schedule 2Sch. 2 to the 1975 Act. The draftsman began by incorporating in that Schedule some of the provisions of the 1970 Act with or without amendment. He then drafted further provisions peculiar to the petroleum revenue. In fact, the only provision of the 1970 Act incorporated in the 1975 Act which concerns directly this application is Taxes Management Act 1970 section 49 subsec-or-para (1)sec. 49(1)which deals with appeals out of time. But much of the argument advanced by Mr Whiteman, QC, on behalf of the applicant depends upon the differences between the provisions of the 1975 Act and the equivalent provisions in the...

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    • 8 August 2008
    ...within 10 was correct, and the matter was res judicata: see, by analogy, R v Special Commissioners ex p Fina Exploration Ltd [1992] STC 1, in which an approximately equivalent provision relating to proceedings before the Special Commissioners was in Furthermore, the common understanding of ......

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