Carr (Hmit) v Armpledge Ltd & Anor

Where a taxing statute provides a relief and imposes express limits, the taxpayer may generally use the relief in the manner most advantageous to it. A further restriction requires clear and necessary implication from the statutory scheme. Under section 239 of the Income and Corporation Taxes Act 1988, surplus ACT claims took effect automatically and in the order in which they were made. The statutory requirement to apply each claim against more recent accounting periods first did not require claims relating to successive accounting periods to be processed chronologically. Reworking the consequences of earlier claims, where necessary to comply with the statutory provisions, did not justify implying a chronological-order requirement.

Armpledge Ltd and Fielden & Ashworth Ltd appealed against Ferris J’s decision allowing the Revenue’s appeals from the Special Commissioners. The Special Commissioners had held in principle that companies could require surplus ACT claims relating to different accounting periods to take effect in the order in which the claims were made.

The companies had made claims under section 239(3) of the Income and Corporation Taxes Act 1988 for surplus ACT from later accounting periods, seeking to use the claims successively against earlier corporation-tax liabilities. The central issue was whether the statutory scheme required claims to be given effect in chronological order of the accounting periods producing the surplus, regardless of the order in which the claims were made.

1. Appeals allowed. Ferris J’s order was set aside and the Special Commissioners’ decision in principle was restored.
2. Section 239(3) of the Income and Corporation Taxes Act 1988 conferred a relief which the taxpayer could, subject to the statutory limits, use in the manner it chose. Those limits concerned the two-year period for making a claim, the six-year period for eligible accounting periods, and the requirement to set the surplus against more recent periods before remote periods.
3. The subsection dealt with the consequences of a single claim. It did not expressly regulate the order in which two or more claims were to take effect. The effect of a claim was automatic and did not depend on an exercise of discretion by the Inspector of Taxes or the Board of Inland Revenue.
4. The reverse chronological sequence required within an individual claim did not require separate claims to be processed chronologically. Nor did giving effect to claims out of chronological order breach the six-year rule. The taxpayer was using the statutory relief, rather than avoiding that rule.
5. Where the operation of section 239(3) and (4) required earlier calculations to be reworked after a later claim was made, that was simply the consequence of complying with the statutory scheme. The court was required to give effect to those provisions, but no further implication was justified.
6. In the absence of express wording, a restriction denying the taxpayer the chosen order of claims could be implied only where the statutory scheme clearly and necessarily demanded it. That requirement was not met.

• Court of Appeal (Civil Division): Appeals by Armpledge Ltd and Fielden & Ashworth Ltd allowed; Ferris J’s order set aside and the Special Commissioners’ decision in principle restored.
• High Court, Chancery Division: Ferris J allowed the Revenue’s appeals from the Special Commissioners and answered the statutory question against the taxpayers. The decisions were reported at [1998] STC 999.
• Special Commissioners: Held in principle that the taxpayers could have their surplus ACT claims given effect in the order in which the claims were made.