Eagerpath Ltd v HM Inspector Of Taxes

Section 33(4) of the Taxes Management Act 1970 permits an appeal from the Special Commissioners only on a point of law arising in connection with the computation of profits. That expression concerns the method of computing profits, not every legal issue which may affect the taxpayer’s ultimate liability or entitlement to relief. The interaction between a settlement under section 54 and an error or mistake claim under section 33 is therefore outside that restricted appellate jurisdiction. The taxpayer may, in an appropriate case, seek judicial review of an error of law by the Special Commissioners. The appeal was dismissed.

Eagerpath Ltd appealed against the dismissal by Arden J of its appeal from the Special Commissioners. The Special Commissioners had dismissed Eagerpath’s claim under section 33 of the Taxes Management Act 1970 for repayment arising from an alleged error or mistake in its corporation tax return.

The company had agreed with the inspector that its computations were accepted. It later sought terminal loss relief, contending that the earlier treatment of bank interest had been mistaken. Arden J held that the issue whether section 33 was unavailable because the matter had been covered by the earlier agreement was not a point of law arising in connection with the computation of profits. The central issue was whether that conclusion was correct.

1. The appeal was dismissed with costs. The restriction in section 33(4) of the Taxes Management Act 1970 is confined to a point of law arising in connection with the computation of profits.
2. Per Robert Walker LJ, the relevant authorities give those words their natural meaning. A point does not fall within section 33(4) merely because its determination affects the amount of profits or the existence or extent of the taxpayer’s liability. It must itself relate to the method of computing profits. The decisions in Carrimore Six Wheelers Ltd v IRC (1944) 26 TC 301 and Arranmore Investment Co Ltd v IRC (1973) 48 TC 623 supported that conclusion.
3. The question whether the principles governing the interaction between section 54 settlements and discovery assessments also apply to section 33 error or mistake claims was a question of law, but not one arising in connection with the computation of profits. Arden J was therefore right to dismiss the appeal on that preliminary jurisdictional issue.
4. The court expressed no final view on whether the concession made before the Special Commissioner was correct or whether the Special Commissioner had applied the right substantive test. Robert Walker LJ’s provisional view was that similar principles would probably apply to discovery assessments and error or mistake claims, subject to possible marginal differences.
5. Article 6 of the European Convention on Human Rights did not apply to this type of tax appeal because it did not determine civil rights and obligations. Brooke LJ added that judicial review may provide a remedy for a pure error of law by the Special Commissioners where the statutory appeal route is unavailable.

• Court of Appeal (Civil Division): appeal from Arden J dismissed. The court upheld the conclusion that the issue was not a point of law arising in connection with the computation of profits.
• High Court, Chancery Division, Revenue List: Arden J dismissed Eagerpath’s appeal from the Special Commissioners’ decision; the judgment is reported at [1999] STC 771.
• Special Commissioners: dismissed Eagerpath’s appeal against the rejection of its section 33 claim.