Revenue And Customs v MCX Dunlin (UK) Ltd

Where later losses are carried back and reduce or extinguish an assessed petroleum revenue tax liability, the amount of advance petroleum revenue tax previously set against that liability may be revisited. The superseding assessment determines the amount against which advance petroleum revenue tax is set. Any resulting excess advance petroleum revenue tax is carried forward and, if unused, repaid without interest.

A dispute that could have been brought before the First-tier Tribunal under the statutory tax appeal procedure must not ordinarily be pursued through ordinary civil proceedings. A claim under CPR Part 8 seeking to challenge the treatment of a tax repayment in that way is an abuse of process.

Losses arising after oil production ceased in the Dunlin field were carried back against profits previously assessed to petroleum revenue tax. HM Revenue and Customs refunded sums to former participators, treating part as repayment of petroleum revenue tax carrying interest and part as repayment of excess advance petroleum revenue tax without interest. MCX Dunlin, which had acquired the former participators’ interests, brought a declaration claim under CPR Part 8.

Fancourt J granted the declaration, holding that all the refunded sums were overpaid petroleum revenue tax and rejecting the procedural objections: [2020] EWHC 11 (Ch). The appeal concerned whether the repayments were of petroleum revenue tax or advance petroleum revenue tax, and whether the dispute should have been pursued by statutory appeal to the First-tier Tribunal.

1. Appeal allowed. The repayments on which interest was refused were repayments of advance petroleum revenue tax, not petroleum revenue tax. The Part 8 proceedings were also an abuse of process because the dispute could have been determined through the statutory tax appeal route.
2. Under section 139(3) of the Finance Act 1982, advance petroleum revenue tax is set against the liability for petroleum revenue tax charged in an assessment. That set-off is not fixed by an assessment which is later superseded. Where a later loss is carried back under section 7(3) of the Oil Taxation Act 1975, the reduced or extinguished petroleum revenue tax liability may reduce the amount of advance petroleum revenue tax treated as set off.
3. An assessment remains conclusive while it stands, but an assessment substituted under paragraph 12 or paragraph 14 of Schedule 2 to the Oil Taxation Act 1975 is determinative for the relevant period. The earlier assessment, and the larger amount of advance petroleum revenue tax previously thought to have been set off, then become immaterial. The additional advance petroleum revenue tax is carried forward under section 139(4) of the Finance Act 1982 and, if unused by the relevant time, is repayable under paragraph 14 of Schedule 19 without interest.
4. The court rejected the suggested difficulties concerning corporation tax deductions and the alleged partial rewriting of history. Section 17 of the Oil Taxation Act 1975 treats advance petroleum revenue tax set against petroleum revenue tax as payment of petroleum revenue tax for corporation tax purposes. If the petroleum revenue tax liability is reduced, the corresponding deduction can be reversed.
5. By paragraph 14 of Schedule 2 to the Oil Taxation Act 1975, a participator could have appealed the assessment’s discharge figure, including the implicit treatment of part of the repayment as advance petroleum revenue tax. The principle in Knibbs and the exclusive statutory appeal jurisdiction explained in Autologic therefore applied. Ordinary civil proceedings seeking to achieve the same result were an abuse of process.

1. Court of Appeal (Civil Division) allowed HMRC’s appeal.
2. High Court of Justice, Revenue List (Chancery Division) granted MCX’s declaration and rejected the procedural objections: [2020] EWHC 11 (Ch).