Taxpayer companies challenged the way that the revenue restricted claims for group Corporation Tax relief for subsidiary companies in Europe. The issue was awaiting a decision of the European Court. The Revenue said that the claims now being made by other companies should proceed through the Commissioners who could implement European law directly. The taxpayers challenged their jurisdiction to hear certain claims.
Held: Where the Commissioners had jurisdiction, the taxpayers had an obligation to take their claims to the Commissioners.
Where the time limit for use of the statutory scheme had not expired, a taxpayer’s only way of challenging a taxing provision as contrary to European law was by making use of the statutory tribunal scheme, as opposed to judicial review.
Lord Nicholls of Birkenhead said: ‘Underlying this conclusion is a point of general policy concerning cases where an applicant claims he has been wrongly deprived of benefits to which he is entitled under directly applicable provisions of Community law. Where Parliament has assigned to a specialist tribunal responsibility for adjudicating on disputes over the payment of such benefits, and an application to that tribunal is not time-barred, in the ordinary course the primary remedy for non-receipt of such benefits is to have recourse to that tribunal. That tribunal will give effect to the applicant’s rights under directly enforceable provisions of Community law as well as his rights under domestic law. The tribunal will afford him the benefits to which he is properly entitled. In such cases, where that course is still available to an applicant, claims in the High Court founded on an alleged breach of Community law will not normally be appropriate.’
Lord Millett said that ‘the computation of a taxpayer’s taxable profits for the purpose of determining his liability to tax is within the exclusive jurisdiction of the commissioners’
Lord Walker of Gestingthorpe referred to: ‘the general principle embodied in tax law before self-assessment, that any dispute with the revenue about an individual’s liability to income tax or a company’s liability to corporation tax is to be determined in the first instance by the general commissioners or the special commissioners.’

Lord Nicholls of Birkenhead, Lord Steyn, Lord Hope of Craighead, Lord Walker of Gestingthorpe
[2005] UKHL 54, Times 01-Aug-2005, [2005] 3 CMLR 2, [2005] STC 1357, [2005] STI 1336, [2006] 1 AC 118, [2005] 3 WLR 339, [2005] 4 All ER 1141, [2005] BTC 402, [2006] Eu LR 131, 77 TC 504
Bailii, House of Lords
England and Wales
Citing:
Cited – Imperial Chemical Industries v Colmer ECJ 16-Jul-1998
A member state was not allowed to impose a tax regime which discriminated against the subsidiaries of a company based in that state where they were based in other member states, but discrimination was allowed where the subsidiaries were based . .
Cited – Metallgesellschaft Ltd and Others v Inland Revenue Commissioners and Another Hoechst Ag and Another v Same ECJ 8-Mar-2001
The British law which meant that non-resident parent companies of British based businesses were not able to recover interest on payments of advance corporation tax, was discriminatory against other European based companies. Accordingly the law was . .
Appeal from – Loss Relief Group, Test Claimants In v Inland Revenue CA 28-May-2004
The taxpayers sought determination by the court of their various claims for group tax relief. The High Court had declined jurisdiction.
Held: The appeal was allowed. The judge’s attitude was one which would perhaps appeal to most lawyers . .
At first instance – NEC Semi-Conductors Limited and Other Test Claimants v The Commissioners of Inland Revenue ChD 24-Nov-2003
UK companies were subsidiaries of companies resident abroad, and complained that they were unable to make group income elections.
Held: The prohibition infringed non-discrimination provisions of double taxation agreements – non-discrimination . .
At First Instance – Claimants under the Loss Relief Group Litigation Order v Inland Revenue Commissioners ChD 3-Mar-2004
Various claimants sought to have issues of law on group relief and other issues settled under a group litigation order.
Held: The High Court had no jurisdiction to hear such matters until they had first been raised in ordinary tax appeals . .
Cited – In re Vandervell’s Trusts (No 1); Vandervell Trustees Limited v White and Others HL 15-Jul-1970
Practice – Parties – Joinder – Proceedings between subjects raising issues material to income tax – Joinder of Commissioners of Inland Revenue – Income Tax Act 1952 (15 and 16 Geo. 6 and 1 Eliz. 2, c.10), ss. 52 and 64 ; Income Tax Management Act . .
Mentioned – Barraclough v Brown HL 1897
The 1889 Act gave statutory undertakers who had incurred expenditure in removing a sunken vessel a right ‘to recover such expenses from the owner of such vessel in a court of summary jurisdiction.’ the undertakers began their action in the High . .
Approved – Glaxo Group Ltd and Others v Inland Revenue Commissioners ChD 21-Nov-1995
A tax adjustment can be made by the Inland Revenue on an open assessment following transfer pricing enquiry and direction, even after many years. The court considered that the jurisdiction of the special and the general commissioners to determine . .
At Special Comissioners – Marks and Spencer Plc v Halsey (Inspector of Taxes) 2003
Marks and Spencer Plc appealed against the refusal of group relief, on the ground that the statutory limitations on the territorial scope of group relief were incompatible with, and overridden by, Community law. The Special Commissioners dismissed . .
Cited – Regina v Secretary of State for Transport, Ex parte Factortame Ltd HL 18-May-1989
The applicants were companies owned largely by Spanish nationals operating fishing vessels within UK waters. The 1988 Act required them to re-register the vessels as British fishing vessels. The sought suspension of enforcement pending a reference . .
Cited – Amministrazione Delle Finanze Dello Stato v Simmenthal SpA (No 2) ECJ 9-Mar-1978
ECJ The Court of Justice considered a reference for a preliminary ruling, pursuant to article 1977 of the Treaty, as having been validly brought before it so long as the reference has not been withdrawn by the . .
Cited – Imperial Chemical Industries Plc v Colmer (Inspector of Taxes) (No 2) HL 18-Nov-1999
Where a group of companies sought consortium group relief, but the majority of the companies within the group were based outside the European Union, the court need not apply European Union standards to the test, but could instead apply the standards . .
Cited – D v Inspecteur van de Belastingdienst /Particulieren /Ondernemingen buitenland te Heerlen (Free Movement Of Capital) ECJ 5-Jul-2005
ECJ Tax legislation – Wealth tax – Entitlement to an allowance – Separate treatment of residents and non-residents – Double taxation convention. . .
Cited – Dorsch Consult Ingenieursgesellschaft v Bundesbaugesellschaft Berlin mbH ECJ 17-Sep-1997
ECJ Preliminary rulings – Reference to the Court – National court or tribunal within the meaning of Article 177 of the Treaty – Definition – Body competent to hear appeals concerning the award of public . .
Cited – Steenhorst-Neerings v Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en Huisvrouwen ECJ 27-Oct-1993
Europa Community law does not preclude the application of a national rule of law according to which benefits for incapacity for work are payable no more than one year before the date of claim, in the case where . .
Cited – Brasserie du Pecheur v Bundesrepublik Deutschland; Regina v Secretary of State for Transport, ex parte Factortame and others (4) ECJ 5-Mar-1996
Member states may be liable to individuals for their failure to implement EU laws. The right of individuals to rely on directly applicable provisions of the EC Treaty before national courts is not sufficient in itself to ensure full and complete . .
Cited – Elsie Rita Johnson v Chief Adjudication Officer ECJ 6-Dec-1994
Europa Social policy – Equal treatment for men and women in matters of social security – Directive 79/7 – Article 4(1) – Direct effect – National legislation limiting the period prior to the bringing of a claim . .
Cited – Inland Revenue and Another v Deutsche Morgan Grenfell Group Plc CA 4-Feb-2005
The company sought repayment of excess advance corporation tax payments made under a mistake of law. The question was the extent of the effect of the ruling in Klienwort Benson, in particular whether it covered sums paid as taxation, and how the law . .
Cited – Amon v Raphael Tuck and Sons Ltd 1956
The court analysed the circumstances under which additional parties might be joined to an action by a defendant, applying a narrow interpretation. The court considered whether a defendant may be added against the parties’ wishes: ‘There are two . .
Cited – Pickstone v Freemans Plc HL 30-Jun-1988
The claimant sought equal pay with other, male, warehouse operatives who were doing work of equal value but for more money. The Court of Appeal had held that since other men were also employed on the same terms both as to pay and work, her claim . .
Cited – Argosam Finance Co Ltd v Oxby (Inspector of Taxes) CA 1965
A company which dealt in shares issued an originating summons in the Chancery Division requesting a declaration as to the correct method of computing its income for the purposes of loss relief. The revenue challenged the proceedings as an abuse of . .
Cited – In re Vandervell’s Trusts; Vandervell Trustees Limited v White and Others CA 1970
The deceased had sought to create a trust to benefit the Royal College of Surgeons. The parties disputed its tax effect.
Held: Lord Denning MR said: ‘We will in this court give the rule a wide interpretation so as to enable any party to be . .
Cited – Jean Reyners v Belgian State ECJ 21-Jun-1974
Europa The rule on equal treatment with nationals is one of the fundamental legal provisions of the community. As a reference to a set of legislative provisions effectively applied by the country of establishment . .
Cited – Litster and Others v Forth Dry Dock and Engineering Co Ltd HL 16-Mar-1989
The twelve applicants had been unfairly dismissed by the transferor immediately before the transfer, and for a reason connected with the transfer under section 8(1). The question was whether the liability for unfair dismissal compensation . .
Cited – Woolwich Equitable Building Society v Inland Revenue Commissioners (2) HL 20-Jul-1992
The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. . .
Cited – Rewe-Handelsgesellschaft Nord Mbh Et Rewe-Markt Steffen v Hauptzollamt Kiel ECJ 7-Jul-1981
Europa The exemption provided for by regulation no 1544/69, as last amended by regulation no 3061/78, applies only to goods contained in the personal luggage of travellers coming from a non-member country. That . .
Cited – Emmott v Minister for Social Welfare and Attorney General ECJ 25-Jul-1991
Europa So long as a directive has not been properly transposed into national law, individuals are unable to ascertain the full extent of their rights. That state of uncertainty for individuals subsists even after . .
Cited – Kobler v Republik Osterreich ECJ 30-Sep-2003
The claimant’s claim had been presented to the Supreme Administrative Court in Austria, who had referred a question to the ECJ. Following the Schoning decision, the court withdrew the referral, and dismissed the claim. He now claimed damages from . .
Cited – Marshall v Southampton and South West Hampshire Area Health Authority (No 2) ECJ 2-Aug-1993
The UK law limiting awards of damages in sex discrimination cases is unlawful, and fails to implement European directive fully. Financial compensation must be at a level adequate to achieve equality between the workers identified. . .
Cited – Roquette Freres SA v Direction des services fiscaux du Pas-de-Calais ECJ 28-Nov-2000
Europa In the absence of Community rules on reimbursement of national charges levied though not due, it is for the domestic legal system of each Member State to designate the courts and tribunals having . .
Cited – Regina v Commissioners of Inland Revenue ex parte Michael Bishopp (for and on Behalf of Partners In Price Waterhouse (a Firm)) Admn 18-Dec-1997
. .
Cited – Peterbroeck, Van Campenhout and Cie v Belgian State ECJ 14-Dec-1995
It is a basic principle of European Union law that national law should provide effective legal protection, by establishing a system of legal remedies and procedures which ensure respect for the relevant European law right: ‘For the purposes of . .
Cited – Criminal proceedings against Sanz de Lera and others ECJ 14-Dec-1995
Europa Articles 73b(1) and 73d(1)(b) of the Treaty, which prohibit restrictions on movements of capital between Member States and between Member States and non-member countries, on the one hand, and authorizing . .

Cited by:
Cited – Sharp v Caledonia Group Services Ltd EAT 1-Nov-2005
EAT Equal Pay Act – Material factor defence – In an equal pay claim involving a presumption of direct discrimination the genuine material factor defence requires justification by objective criteria.
The . .
Cited – Total Network Sl v Revenue and Customs HL 12-Mar-2008
The House was asked whether an action for unlawful means conspiracy was available against a participant in a missing trader intra-community, or carousel, fraud. The company appealed a finding of liability saying that the VAT Act and Regulations . .
Cited – Blackburn and Another v West Midlands Police CA 6-Nov-2008
The claimants, female police officers, complained that male officers had received priority payments where they had received none. The defendant said that the payments were justified in achieving a proper aim, namely the encouragement of night . .
Cited – The Bodo Community and Others v The Shell Petroleum Development Company of Nigeria Ltd TCC 20-Jun-2014
15,000 or more claimants and claims on behalf of children, sought damages at common law and statutory compensation under the law of Nigeria in relation to oil spills from pipelines said to have been caused by Shell Petroleum Development Company of . .
Cited – Cotter v Revenue and Customs SC 6-Nov-2013
This appeal asked as to the boundary between the jurisdiction of the First-tier Tribunal (Tax Chamber) and that of the county court or the High Court, and the legality of the approach which the Revenue took to entries which Mr Cotter, had made in a . .
Cited – HM Revenue and Customs v Cotter CA 8-Feb-2012
Mr Cotter’s accountants had submitted a second tax return adding claims to loss relief in the following year. The claims were contentious, but he invited a review by the Revenue asserting that the losses wiped out any liability to tax. The Revenue . .
Cited – Revenue and Customs v Cotter ChD 14-Apr-2011
The taxpayer’s accountants had submitted a tax return amending the taxpayer’s own return adding claims for losses. The accountant acknowledged the contentious nature of the claim and invited a review. The Revenue sought now to recover the tax due . .

Lists of cited by and citing cases may be incomplete.

Corporation Tax, Taxes Management

Leading Case

Updated: 02 November 2021; Ref: scu.229067

The taxpayer companies had paid funds into a trust for employees. They sought to set off the payments against their liability to corporation tax. The revenue argued that they were deductible only in the year in which they were paid to the employees.
Held: The taxpayer’s appeal failed: ‘the whole of the funds were potential emoluments. They could be used to pay emoluments.’ The words ‘with a view to their becoming relevant emoluments’ apply both to the purpose for which amounts are held by an intermediary and also to the purpose for which they are ‘reserved in the account of an employer’. The taxpayer argued that relevant emoluments were contractually or constructively payable, whereas a reserve should properly be made for potential emoluments because they are payable only upon the occurrence of a contingency; for example, a bonus payable if a certain profit is achieved. If that was a correct description of potential emoluments for which a reserve has been made, it would be equally true to say that amounts held by an intermediary were for the payment of emoluments upon a contingency, namely the exercise of a discretion by the trustees. In both cases, the sums in question may or may not be used to pay emoluments but there is at least a realistic possibility that they will be. There may be some unfairness in this, but that unfairness had been confirmed by Parliament.
Lord Hoffmann stated that although a definition may give a word a meaning different from its ordinary meaning, the choice of words by Parliament should not be wholly ignored: ‘If the terms of the definition are ambiguous, the choice of the term to be defined may throw some light on what they mean’.
Lord Hoffmann considered the meaning of the defined term ‘potential emoluments’, said: ‘In the ordinary use of language, the whole of the funds were potential emoluments. It is true that, as Charles J pointed out, ‘potential emoluments’ is a defined expression, and a definition may give the words a different meaning from their ordinary meaning. But that does not mean that the choice of words adopted by Parliament must be wholly ignored. If the terms of the definition are ambiguous, the choice of the term to be defined may throw some light on what they mean.’
Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Hope of Craighead, Lord Scott of Foscote, Lord Walker of Gestingthorpe
[2005] UKHL 47, Times 11-Jul-2005, [2005] STC 1111, [2005] BTC 355, (2003) 77 TC 146, 77 TC 146, [2005] 4 All ER 107, [2005] STI 1235, [2005] Pens LR 395
Bailii, House of Lords
Finance Act 1989 37 43, Income and Corporation Taxes Act 1988 202A 202B
England and Wales
Citing:
At First instance – MacDonald (Inspector of Taxes) v Dextra Accessories Ltd and Others ChD 16-Apr-2003
The inspector sought to disallow charging to current tax period payments made by the employer to an employee benefit trust.
Held: The payments were not made and held by the trustees ‘with a view to becoming relevant emoluments’ within the . .
Appeal from – MacDonald (HM Inspector of Taxes) v Dextra Accessories Ltd and others CA 28-Jan-2004
The company had set up a trust for the benefit of its employees. The Inspector sought to tax the payments made into the trust as ’emoluments’
Held: The appeal was allowed. The payments were ‘potential emoluments’ which were held by the . .
Cited – Heasman v Jordan 1954
Emoluments paid under an office or employment are taxed under Schedule E as income of the year of assessment in which they were earned, and it was irrelevant when they were paid. . .
Special Commissioners – Dextra Accessories Ltd and others v Inspector of Taxes SCIT 25-Jul-2002
SXIT EMPLOYEE BENEFIT TRUST – whether deduction of contributions postponed until taxable as emoluments under FA 1989 s.43(11) – no – whether sub-funds in favour of directors who controlled the company taxable as . .

Cited by:
Cited – Barclays Bank Plc and Another v HM Revenue and Customs CA 11-May-2007
Retired bank employees had previously received free tax advice. When the service was withdrawn, the bank made a payment. The Revenue said that this payment was chargeable to income tax.
Held: The bank’s appeal failed. The payment was made ‘in . .
Cited – Routier and Another v Revenue and Customs ChD 18-Sep-2014
Executors appealed against rejection of their claim that a gift in the will qualified for relief against Inheritance Tax as being a charitable gift. The Trusts concerned assets in Jersey.
Held: The appeal failed: ‘The expression ‘held on trust . .
Cited – Routier and Another v Revenue and Customs CA 16-Sep-2016
Executors appealed against a decision that a residual gift in a will was not charitable and that it was therefore subject to Inheritance Tax arguing that the section if construed in this way was an unlawful restriction on the free movement of . .
Cited – RFC 2012 Plc (Formerly The Rangers Football Club Plc) v Advocate General for Scotland SC 5-Jul-2017
The Court was asked whether an employee’s remuneration is taxable as his or her emoluments or earnings when it is paid to a third party in circumstances in which the employee had no prior entitlement to receive it himself or herself.
Held: The . .

Lists of cited by and citing cases may be incomplete.
Updated: 24 August 2021; Ref: scu.228283