Japan Post & Ors v Revenue & Customs

Section 824 of the Income and Corporation Taxes Act 1988 did not entitle a non-UK resident sovereign entity, entitled to tax credits under section 232(3), to repayment supplements on payment of those credits. The necessary modifications required by section 824(2) did not transform the statutory limitation applicable to repayments of income tax paid by or on behalf of an individual. Any extension of repayment supplements to entities such as the claimants required express statutory words.

The claimants, successors to Japan Post, were recognised as an arm of the Japanese Government and were therefore entitled to tax credits on UK dividends under section 232(3) of the Income and Corporation Taxes Act 1988. They were exempt from UK tax and had received some, but not all, of the credits due.

The claim concerned approximately £1.7 million in repayment supplements under section 824 of the Act. The issue was whether the statutory reference to payment of a tax credit, with the necessary modifications, extended the supplement to a non-UK resident entity which was not an individual.

1. The claim was dismissed. The claimants were entitled to tax credits under section 232(3) of the Income and Corporation Taxes Act 1988, but that entitlement did not itself confer a right to repayment supplements.
2. Section 824 was concerned principally with repayment supplements on amounts within the statutory categories. In its original form, the provision applied to income tax paid by or on behalf of an individual, and the later amendments preserved a distinction between payments on account and income tax paid by or on behalf of an individual.
3. Section 824(2) required the provision to apply to payment of the whole or part of a tax credit with the necessary modifications. The appropriate modifications were limited changes such as replacing “repayment” with “payment”, and adapting references to income tax paid to references to a tax credit paid. They did not remove the statutory limitation to individuals.
4. The claimants could not be treated as persons paying tax on account under section 824(1)(a). Nor did section 232(3), which gave them tax credits calculated by reference to section 231(1), state that they were to be treated as individuals for the purposes of section 824.
5. The Double Taxation Relief (Taxes on Income)(Japan) Order 1970 did not assist. Article 11(3)(b) placed qualifying Japanese residents in the position of an individual UK resident for the specified tax-credit entitlement, but did not require a more favourable construction of section 824.

The legislation could readily have extended repayment supplements to entities such as the claimants if that had been intended. In the absence of express words, the court declined to make that extension.