MCX Dunlin (UK) Ltdd v Revenue And Customs

Where advance petroleum revenue tax (APRT) has been used by statutory set-off to discharge a petroleum revenue tax (PRT) liability, it is treated as payment of PRT for the purposes of a later repayment following the carry-back of allowable losses. It does not become excess APRT credit merely because the later loss shows that the original PRT assessment was excessive. A repayment of that PRT is therefore subject to statutory interest. A Part 8 claim may appropriately determine the issue where the claimant has a legitimate financial interest, the parties have fully argued the point, and the procedure is the most effective means of resolving the dispute.

The claimant acquired interests in an oilfield from former participators. Under the sale agreements, the former participators were required to pass on tax refunds arising when the claimant’s later allowable losses were carried back against their earlier PRT profits.

HMRC repaid PRT for the 1983–1986 periods, paying interest on the amounts originally paid in cash but not on amounts discharged by APRT set-off. The central substantive issue was whether those amounts were repayments of PRT or repayments of excess APRT credit under Finance Act 1982, Schedule 19, paragraph 14. A further issue was whether the claimant could obtain declaratory relief by Part 8 proceedings.

1. Substantive issue. APRT and PRT are separate liabilities, but Finance Act 1982, section 139(3), provides for APRT to be set against and discharge a PRT liability. Section 17(1A) of the Oil Taxation Act 1975 deems the PRT to have been paid when it became due. It does not preserve the amount as APRT credit after the statutory set-off.
2. Finance Act 1982, section 142 treats the liabilities as separate and permits consequential assessments and repayments. It does not require a repayment of PRT to be made retrospectively by re-crediting APRT. Nor did the different statutory regime considered in Procter & Gamble Ltd v Taylerson [1988] STC 854; [1990] STC 624 justify that conclusion.
3. The APRT paid by the former participators had been fully used to discharge PRT liabilities before the end of the APRT regime. There was therefore no excess APRT credit capable of being claimed under Schedule 19, paragraph 14. The later carry-back of allowable losses reduced the earlier assessable profits and made the PRT excessive. The resulting repayments were repayments of PRT and attracted interest under Schedule 2, paragraphs 16 and 17 of the Oil Taxation Act 1975.
4. Burton v Mellham [2006] UKHL 6; [2006] 2 All ER 917 established that set-off can discharge a tax liability in the same way as payment, but did not determine the statutory construction issue in this case. Elf Enterprise Caledonia v IRC [1994] STC 785 was not authority for treating the repayment as APRT credit.
5. Procedural issue. The claimant had a sufficient interest because a declaration would likely result in further interest being paid to it. An appeal against the amended assessments was not the appropriate route to challenge HMRC’s calculation of interest, and judicial review was unnecessary. Applying the principles stated in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387; [2010] 1 WLR 318, Part 8 was an effective and appropriate procedure. A declaration was granted that the Relevant Repayments carried statutory interest.

First-instance decision. The judgment records earlier amended tax assessments and repayments but no appeal from a lower court.