Six Continents Ltd v Inland Revenue

Challenges to a future tax charge should ordinarily be brought through the statutory appeal machinery created by Parliament. Where a charge under Part 8C of the Corporation Tax Act 2010 has not yet arisen, a claim in the High Court is premature and may constitute an abuse of process. The First-tier Tribunal has the same ability as the High Court to consider whether the charge is incompatible with EU law. A claimant should not obtain a prospective gross-up of restitution merely because a future tax liability may arise. Pleadings should identify concrete issues arising from existing facts, rather than hypothetical future difficulties.

Six Continents sought permission to amend its particulars of claim to challenge the validity under EU and human rights law of the Restitution Interest Tax Provisions introduced by section 38 of the Finance (No. 2) Act 2015 and contained in Part 8C of the Corporation Tax Act 2010. The proposed amendments sought disapplication of the provisions, an increase in any restitution award to reflect tax, and compensation for alleged breaches of EU law.

The challenge was made before judgment in the underlying restitution proceedings and before any Part 8C assessment or withholding had occurred. The issues were whether the amendments were premature, whether the First-tier Tribunal was the appropriate forum, and whether the claimants could preserve possible future claims in the High Court.

1. Permission refused. The proposed amendments had no realistic prospect of success at that stage because the claimants had not obtained judgment including restitution interest and no Part 8C charge or withholding had crystallised.
2. The statutory appeal machinery provided by Parliament was the appropriate route for any future challenge to an assessment under section 357 YQ or withholding under section 357 YO. Applying Autologic Holdings Plc v Inland Revenue Commissioners [2005] UKHL 54, Six Continents could not use High Court proceedings indirectly to obtain relief assigned to the specialist tribunal. The point applied whether characterised as jurisdiction or abuse of process.
3. The First-tier Tribunal would have the same ability as the High Court to consider the compatibility of Part 8C with EU law. The fact that the underlying claims concerned closed years did not alter the forum for a future Part 8C appeal.
4. The claim for a grossed-up restitution award was misconceived. The restitution award would be assessed under the applicable restitution principles. If Part 8C were valid, it would bind the claimants like other primary tax legislation; if invalid, overpaid tax could be recovered through the statutory appeal machinery. Neither situation justified increasing the restitution award in advance.
5. The proposed State-liability claim and any future claim concerning interest on repayment were also premature. The observations in Autologic Holdings Plc v Inland Revenue Commissioners [2005] UKHL 54 about staying proceedings did not justify keeping these hypothetical claims alive, since no claim had yet crystallised and fresh proceedings could be brought if necessary. The proper function of pleadings was to formulate concrete issues arising on existing facts.