Inspector of Taxes v Pumahaven Ltd.

On an application to postpone tax under the Tax Management Act 1970, the Commissioners must evaluate whether there are reasonable grounds for believing that the taxpayer is overcharged. The test is subjective and non-hard-edged. Reasonable Commissioners may reasonably differ, provided their conclusion is not perverse. They must consider substantial arguments and evidence put before them. Failure to address a material argument is an error of law. On appeal, the court has power to remit the matter for the Commissioners to perform that function. It should not decide the issue for the first time where the Commissioners retain the statutory evaluative responsibility, unless the argument is plainly untenable or only one lawful conclusion is possible.

The Revenue appealed from part of an order made by Park J in the Chancery Division on 4 October 2002. Pumahaven had appealed to the Special Commissioner against a corporation tax assessment exceeding £36 million and sought postponement of payment pending its substantive appeal. The Special Commissioner rejected its loan relationships argument but failed to address its source argument. Park J allowed Pumahaven’s appeal, set aside the decision and remitted the postponement application to a different Special Commissioner. The issue before the Court of Appeal was whether Park J should instead have decided the source argument himself.

Appeal dismissed. The Court of Appeal, in the judgment of Peter Gibson LJ, with which Tuckey LJ and Keene LJ agreed, held that Park J had acted within his statutory discretion in remitting the matter.

1. Under section 55(6) of the Tax Management Act 1970, the Commissioners must have regard to the representations and evidence before them and decide whether it appears to them that there are reasonable grounds for believing that the taxpayer is overcharged, and in what amount. The formula is familiarly subjective. A conclusion is valid if the matter appears to the designated Commissioners and their conclusion is not perverse, even if another person might reasonably reach a different view.
2. The postponement inquiry differs from the substantive appeal inquiry under section 50(6). The former requires an evaluation under a less precise, non-hard-edged test. It is therefore an issue on which reasonable Commissioners may reasonably differ.
3. The authorities concerning remittal for further findings of fact, including Consolidated Goldfields Plc v Commissioners of Inland Revenue [1990] 63 TC 333 and Yuill v Wilson [1980] 1 WLR 910, did not govern a remittal required because the Commissioners had failed to perform another function entrusted to them, namely addressing a substantial argument.
4. Park J was entitled to obtain assistance from R v Hastings and Bexhill General Commissioners ex parte Goodacre [1994] STC 799, although that case concerned judicial review. The source argument was not palpable nonsense. It was therefore proper to remit it to the Commissioners responsible for evaluating whether it afforded reasonable grounds for postponement. The Court of Appeal should not decide an issue which neither the Special Commissioner nor Park J had decided, and the concern about multiple hearings was largely theoretical given the imminent substantive appeal.

The appeal was dismissed with costs summarily assessed as specified in the schedule.

• Court of Appeal (Civil Division): Dismissed the Revenue’s appeal with costs.
• Chancery Division: Park J allowed Pumahaven’s appeal from the Special Commissioner, set aside her decision and remitted the postponement application to a different Special Commissioner for reconsideration.
• Special Commissioner: Refused permission to postpone payment of the corporation tax assessment, having considered the loan relationships argument but not the source argument.