Six Continents Ltd & Anor v The Commissioners of lnland Revenue & Anor

Summary judgment requires the court to conclude that the opposing party has no realistic prospect of success and that no compelling reason requires a trial. Complex legal issues subject to pending appeals, or issues requiring fuller factual and foreign-law evidence, will ordinarily make summary judgment inappropriate.

An interim payment may be ordered where, applying the law at the application date, the court is satisfied on the balance of probabilities that the claimant would obtain judgment for a substantial sum at trial. A foreign tax exemption can still reduce the taxable base and require equivalent treatment under EU law where the underlying receipts fall within the general scope of the foreign tax charge. A receipt outside that scope, such as a return of share premium treated as an equity movement, does not attract the same credit.

The claim concerned corporation tax charged under Case V of Schedule D on dividends paid in the 1993, 1996 and 1997 accounting periods by a wholly owned Dutch subsidiary. The claimant sought restitution of tax said to have been unlawfully levied under EU law, together with compound interest.

The claimant applied for summary judgment or, alternatively, an interim payment. The claim arose against the background of the FII group litigation, including the Supreme Court’s limitation decision and the ECJ’s ruling that the Case V charge was unlawful, subject to the required treatment of foreign taxation. The central issues were whether credits were due for dividends sourced from revaluation adjustments, exempt liquidation profits and share premium account distributions, and whether the claim could properly be determined without a trial.

1. Summary judgment. The court refused summary judgment. Pending appeals in the FII quantification proceedings created a realistic prospect that the applicable law and outcome might change. Other issues raised complex questions of law, fact and Dutch law. The foreign law had not been properly pleaded or proved by independent expert evidence in accordance with CPR Part 35.
2. Interim payment test. Under CPR 25.7(1)(c), the claimant had to satisfy the court, on the balance of probabilities, that it would actually obtain judgment for a substantial, rather than merely likely or negligible, amount if the claim went to trial. The court applied the law as it stood at the application date, while taking account of pending appeals.
3. Revaluation adjustments and exempt profits. The relevant Dutch receipts fell within the basic scope of Dutch corporation tax but were excluded from the taxable amount through the participation exemption or equivalent treatment. That narrowed the tax base and reduced the effective rate of tax. Applying the reasoning in FII (ECJ) II, a credit at the Dutch nominal rate was therefore required to remedy the discriminatory UK treatment.
4. Earlier conclusion. The court followed its conclusion in Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2014] EWHC 4302 (Ch) that a comparable exempt capital gain was prima facie within the foreign tax charge before exemption.
5. Share premium. The evidence showed that share premium was a separate equity item, not income liable to Dutch corporation tax. The claimant’s alternative EU-law argument was provisionally rejected. No credit was due for that part of the dividends. An interim payment was ordered for the remaining parts of the claim, subject to quantification and the agreed reduction.

The judgment was a first-instance decision. It describes earlier applications and decisions in the related FII litigation, but no appeal from this judgment is stated.