Lawson (Inspector of Taxes) v Johnson Matthey

The House of Lords considered whether a payment by a parent company of an injection of funds into an insolvent subsidiary, required by the Bank of England as part of a purchase, was of a capital or revenue nature for corporation tax purposes. The central legal principle was the characterisation of the payment — whether it was an expenditure properly to be regarded as capital (affecting the company’s capital structure) or revenue (deductible for tax purposes). The judgment text supplied does not set out the court's decision or detailed reasoning.

Background and facts:

• The case concerned an insolvent subsidiary that was purchased by the Bank of England subject to an undertaking that the parent company would inject funds into the subsidiary to support the transaction.
• The parent company agreed to provide an injection of £50 million into the subsidiary. The question arose how that payment should be treated for corporation tax.

Parties and procedural posture:

• The appellant/respondent parties are the Inspector of Taxes and Johnson Matthey. The matter reached the House of Lords on appeal.
• Prior stages of the litigation are not described in the supplied text.

Nature of the claim and issues:

• The issue was the tax characterisation of the £50 million payment: whether it was capital in nature or revenue in nature for corporation tax purposes.
• The court thus framed the legal question as one of classification of expenditure for tax treatment in the context of insolvency and rescue-related payments.

Court’s reasoning and outcome:

• The supplied judgment extract does not include the House of Lords’ detailed reasoning, subsidiary findings, or the final disposition of the appeal.