BT Pension Scheme Trustees v HM Revenue & Customs

A claim under section 231(3) of the Income and Corporation Taxes Act 1988 to set off or receive a tax credit is a claim for the credit itself, even though entitlement arises under section 231(1). It is therefore subject to the time limit in section 43 of the Taxes Management Act 1970. Relief is not confined to reducing or extinguishing a tax liability. It can include a payment produced by a tax credit, including payment to an exempt approved pension scheme. A prior claim for exemption from investment-income tax, or an annual return omitting the relevant credits, does not amount to a claim under section 231(3).

The Trustees appealed from the Upper Tribunal (Tax and Chancery Chamber), which held that section 43 of the Taxes Management Act 1970 applied to claims for tax credits under section 231 of the Income and Corporation Taxes Act 1988. The Upper Tribunal’s decision is reported at [2013] UKUT 105 (TCC) and [2013] STC 1781. The Court of Appeal considered whether the claims were claims for relief, whether the statutory time limit applied to claims producing payment rather than set-off, and whether earlier exemption claims or annual returns were sufficient. Community-law issues remained outstanding.

The Court of Appeal unanimously dismissed the appeal. Lord Justice Lewison gave the judgment, with Lord Justices Briggs and Longmore agreeing.

1. Nature of the claim. Section 231(1) creates entitlement to a tax credit, but section 231(3) provides for a claim to set the credit against income tax or to receive any excess. In the case of an exempt approved pension scheme, the claim predominantly seeks payment. The court agreed with the Upper Tribunal that set-off or payment requires a claim. Treating set-off as automatic but payment as claim-based would create an unjustified distinction.
2. Meaning of relief. A claim under section 231(3) is a claim for relief within section 43 of the Taxes Management Act 1970. Relief is not a term of art and may take the form of a payment as well as a reduction or extinction of tax liability. The wording under the Taxes Acts does not require the claim to be for relief from tax. The reasoning was supported by Taylor v MEPC Holdings Ltd [2003] UKHL 70, [2004] 1 WLR 82, and UBS AG v HMRC [2007] EWCA Civ 119, [2007] STC 588. The statutory purpose also supported avoiding unlimited claims requiring payment from the Exchequer.
3. Earlier claims. A claim for exemption under section 592 of the Income and Corporation Taxes Act 1988 was not a claim for tax credits. The exemption applied irrespective of the form of investment income, whereas entitlement to credits depended on the income for the relevant year. Annual returns which omitted the relevant foreign-dividend credits could not constitute claims to those omitted credits.
4. Result. Section 43 applied to the claims. The Trustees’ community-law arguments remained live and might require reference to the CJEU. The appeal was dismissed.

1. Court of Appeal (Civil Division): The appeal was dismissed on the preliminary issue concerning the application of section 43. Community-law issues remained to be determined.
2. Upper Tribunal (Tax and Chancery Chamber): Held that section 43 applied to the claims for tax credits. Decision reported at [2013] UKUT 105 (TCC) and [2013] STC 1781.
3. First-tier Tribunal: The Trustees had accepted, subject to community-law arguments, that section 43 applied.