Claimants Under the Loss Relief Group Litigation Order v Inland Revenue

Disputed questions of tax law between taxpayers and the Revenue should ordinarily be determined through the statutory appeal procedure before the General or Special Commissioners. A group litigation order does not permit taxpayers to bypass that procedure by commencing High Court proceedings. This applies even where the proceedings include related claims for damages, restitution or other consequential relief. The High Court should determine such consequential claims only after the underlying tax issue has been resolved through the appropriate tax appeal. Procedural arguments based on European Community law may also be raised before the Commissioners, who can refer questions to the Court of Justice.

The claimants, multinational corporate groups within a group litigation order, challenged territorial restrictions in the United Kingdom group relief legislation. They sought declarations or equivalent relief that losses of non-United Kingdom companies could be surrendered against United Kingdom profits, relying on the EC Treaty and double taxation agreements. They also advanced consequential claims for restitution, damages or compensation.

The Revenue accepted that the consequential claims could properly be pursued in the High Court, but argued that the underlying tax questions had to begin as appeals to the Special Commissioners. The central issue was whether the High Court, sitting as the first-instance court under the group litigation order, had jurisdiction to determine those tax questions or should decline to exercise any such jurisdiction.

1. Disposition. The High Court held that it either lacked jurisdiction, or should decline to exercise any jurisdiction, over the parts of the claims seeking determination of the underlying group relief issue.
2. The statutory machinery for resolving disputes between taxpayers and the Revenue requires disputed questions of tax law affecting liability or entitlement to tax relief to be raised initially by appeal to the General or Special Commissioners. The court treated the authorities, including Barraclough v Brown [1897] AC 615, Glaxo Group Ltd v IRC [1995] STC 1075 and R v IRC ex parte Bishopp [1999] STC 531, as supporting that conclusion.
3. The position is unchanged where many taxpayers join under a group litigation order. Nor can a claimant combine the tax claim with an associated company’s claim for damages or restitution so as to confer first-instance jurisdiction on the High Court.
4. Claims for consequential relief may proceed in the High Court if available, but they depend upon the prior resolution of the tax issue. The sequential nature of the proceedings meant that inconvenience arising from two jurisdictions did not justify bypassing the Commissioners.
5. Arguments that European Community law displaced procedural requirements could be made before the Commissioners. The Commissioners could refer questions of Community law to the Court of Justice, and the ordinary appeal route thereafter remained available.