Stow & Ors v Stow & Ors

The statutory tax appeal machinery does not automatically exclude High Court jurisdiction over an independent dispute between a taxpayer and HMRC merely because the same factual issue is relevant to a tax appeal. The court must distinguish between a claim whose substantial effect is to determine an open tax assessment and a separate claim involving other rights or liabilities. Where the issue is common to both proceedings, case management remains relevant, but a stay is discretionary. A High Court declaration may proceed where all materially interested parties are before the court, the dispute concerns potential non-tax claims, and determining the issue once will avoid inconsistent outcomes.

The trustees of settlements created from assets associated with Edward Stow sought declarations that Alhaji Mohamad Kebiru, rather than Edward, had been the beneficial owner of property settled into the Northend Settlements. HMRC opposed the claim and applied to strike it out or stay it, relying on inheritance tax and capital transfer tax appeals before the Special Commissioners.

The same beneficial ownership issues were also relevant to possible claims under the Inheritance (Provision for Family and Dependants) Act 1975 and the Insolvency Act 1986, including potential claims concerning Edward’s income tax liabilities. The central issue was whether the statutory tax appeal jurisdiction excluded, or should displace, the High Court proceedings.

1. Application dismissed. HMRC’s application to strike out or stay the trustees’ claim failed. The claim was permitted to continue.
2. The exclusive jurisdiction principle applies where Parliament has prescribed assessment and appeal procedures for determining a tax liability. A claimant cannot circumvent those procedures by presenting a claim for declaratory relief whose substantial effect is to adjudicate an open assessment. The principle was derived from Barraclough v Brown, [1897] AC 615, and explained in Glaxo Group Ltd v IRC, [1995] 1075.
3. The principle did not apply to the trustees’ claim. The second beneficial ownership issue was relevant not only to inheritance tax appeals but also to potential enforcement claims concerning Edward’s separate income tax liabilities under the Insolvency Act 1986. It therefore concerned an independent dispute between the trustees and HMRC. The fact that the same issue might determine both disputes did not make the High Court claim non-justiciable.
4. Vandervell Trustees Ltd v White, [1971] AC 1075, and Autologic Holdings plc v IRC, [2006] 1 AC 118, did not require a different result. Those cases concerned issues relevant only to tax liabilities or reliefs, whereas the present issue also affected other potential claims and parties.
5. A stay was not justified as a matter of discretion. All relevant persons were parties to the High Court proceedings, the factual dispute was suitable for determination by a High Court judge, and a single determination would avoid inconsistent findings. The possible joining of interested persons to the Special Commissioners’ appeals did not provide an adequate alternative.
6. The court considered, but did not decide, whether findings of the Special Commissioners in inheritance tax appeals would create a res judicata or issue estoppel, noting the discussion in King v Walden, [2001] EWHC Ch 419.