Autologic Holdings plc & Ors v Commissioners of Inland Revenue

The House considered whether substantive group-relief claims founded on Community law and seeking restitution or damages for overpaid corporation tax should be heard in the High Court or in the statutory tax appeals forum (the Special Commissioners). The court confirmed the principle that where Parliament has assigned the adjudication of tax assessments and statutory claims to the appeal commissioners, the High Court should not be used as an indirect route to obtain the same outcome, because that would be an abuse of process. Sections of ICTA dealing with group relief (notably section 413(5) and, from 2000, section 402(3A) and (3B)) and the procedures in Schedule 18 to the Finance Act 1998 were central to this conclusion.

However, the House drew an important distinction: where a claimant can still obtain the same tax relief or its practical equivalent through the statutory route (including by appeal to the Special Commissioners and, if necessary, referral to the Court of Justice), the High Court claims for the same relief are prima facie inappropriate and should be stayed. By contrast, where the statutory route is no longer available (for example because time limits have expired) and the Special Commissioners have no jurisdiction to provide an effective remedy, the High Court is the appropriate forum for restitutionary or damages claims under Community law.

The litigation arose from the application of United Kingdom group-relief rules which, on their face, limited relief to companies resident in the United Kingdom (ICTA sections 413(5) and 402(3A)/(3B)). Following developments in Community law (for example the ICI and Hoechst lines of authority), many multinational groups sought reimbursement or compensation for corporation tax they say was wrongly paid because group relief was denied.

The Chancery Division managed a large group litigation order selecting six test groups. Many claimants had both appeals pending before the Special Commissioners and parallel High Court proceedings seeking restitution/damages for overpaid tax and related 'satellite' heads of loss. Park J struck out the category (1) High Court claims (claims for basic group relief) as being in substance the same as appeals against assessments and therefore inappropriate for the High Court. The Court of Appeal reversed and allowed the taxpayers' appeals.

The House considered:

• Nature of the claims: restitution/damages for overpaid corporation tax and consequential relief (four categories of loss were identified: (i) basic group relief, (ii) reclaim of utilised reliefs, (iii) recovery of surrendered reliefs, (iv) claims for payments).
• Procedural issue: whether the High Court or the Special Commissioners is the proper forum for deciding the principal substantive issues, given the statutory code for tax assessments and appeals (Schedule 18 FA 1998, TMA 1970 provisions).
• Community-law constraints: the duty to afford effective remedies under directly applicable Community law (principle of effectiveness and equivalence) and the effect of section 2 of the European Communities Act 1972.

The House held that (i) where claimants can still obtain the relief by the statutory route (including by extension or waiver of time limits where appropriate), the High Court should not be used to re-litigate the same assessment issues and those High Court claims should be stayed; (ii) where claimants cannot obtain an effective remedy under the statutory scheme (for example because time limits have expired and cannot be extended), the High Court is the proper forum for restitutionary or damages claims arising from breach of Community law. The court explained that the Special Commissioners are bound to give effect to directly enforceable Community law and can adapt formal requirements where necessary, but they lack jurisdiction over certain consequential claims. The House therefore allowed the Revenue's appeals, set aside the Court of Appeal orders, ordered stays for cases where statutory relief remained available and permitted High Court proceedings to continue where the statutory route was closed.

Appeal allowed. The House restored the approach of Park J. It held that where a claimant can still obtain the claimed group-relief (including by recourse to the Special Commissioners and referrals to the European Court if necessary), High Court claims that are co-extensive with challenging an assessment are prima facie an abuse of process and should be stayed; where the statutory route is no longer available (for example because time limits have passed) the High Court is the appropriate forum for restitutionary or damages claims for breach of Community law. The House therefore stayed claims in the first class and allowed claims in the second class to proceed in the High Court, remitting the six test cases to the Chancery Division.

High Court (Chancery Division) – management under a Group Litigation Order; Park J struck out the category (1) High Court claims (reported [2004] STC 594). Court of Appeal allowed the taxpayers' appeals ([2005] 1 WLR 52). House of Lords allowed the Commissioners' appeals and set aside the Court of Appeal orders ([2005] UKHL 54).