In HMRC v MCX Dunlin (UK) Ltd [2021] EWCA Civ 186 (17 February 2021), the Court of Appeal overturned the High Court’s decision that interest was due on repayments of liabilities to petroleum revenue tax (PRT) dating from the 1980s which had been met by crediting advance PRT (APRT), holding both that the company’s claim was an abuse of process and that it failed on the merits.
The company acquired the Dunlin oil field and incurred losses on winding down the production of oil, which were allowable under the PRT regime. HMRC carried the losses back against profits made in earlier years by the previous participators in the field and substantial repayments were made to them. Under the terms of the agreement by which the oil field was transferred, the previous participators then passed the repayments on to the company. To the extent that the PRT liability had been met by crediting APRT under rules that applied from 1982 to 1987, the repayments were made without interest. The company successfully made a claim, under Civil Procedure Rules (CPR) Part 8, for a declaration from the High Court that the repayments should carry interest. HMRC appealed.
The Court of Appeal had to consider two questions:
were the repayments in question of APRT (which would not carry interest) or of PRT (which would)?
was it appropriate for the company to have brought a claim under CPR Part 8?
On the first question, the court had little difficulty in taking a different view from the High Court and deciding that the repayments were of APRT.
On the second question, the court ruled that it was an abuse of process to pursue a civil claim when the issues could have been determined under the normal appeal process (even though any appeal would need to have been made by a previous participator rather than the company). The court rejected the company’s argument that because the assessments in question had put both the amount chargeable to tax and the amount payable as zero, there was nothing against which an appeal could have been made. An appeal could be made against an assessment and the right to do so was not limited to an appeal against the amount of tax due. The assessment had included a ‘discharge’ (or repayment) figure and, as the dispute turned on the nature of the tax discharged, there was an issue ‘eminently suitable’ for decision by the FTT.
Why it matters: Although the subject matter of this case (whether HMRC should pay interest on overpaid PRT dating from the 1980s) is rather niche, it does show that sometimes finality in the tax system takes a very long time to achieve. The court’s decision on the abuse of process point is of wider interest, reinforcing the principle that where an issue can be resolved by appeal taxpayers cannot generally seek to pursue it in ordinary civil proceedings.
In HMRC v MCX Dunlin (UK) Ltd [2021] EWCA Civ 186 (17 February 2021), the Court of Appeal overturned the High Court’s decision that interest was due on repayments of liabilities to petroleum revenue tax (PRT) dating from the 1980s which had been met by crediting advance PRT (APRT), holding both that the company’s claim was an abuse of process and that it failed on the merits.
The company acquired the Dunlin oil field and incurred losses on winding down the production of oil, which were allowable under the PRT regime. HMRC carried the losses back against profits made in earlier years by the previous participators in the field and substantial repayments were made to them. Under the terms of the agreement by which the oil field was transferred, the previous participators then passed the repayments on to the company. To the extent that the PRT liability had been met by crediting APRT under rules that applied from 1982 to 1987, the repayments were made without interest. The company successfully made a claim, under Civil Procedure Rules (CPR) Part 8, for a declaration from the High Court that the repayments should carry interest. HMRC appealed.
The Court of Appeal had to consider two questions:
were the repayments in question of APRT (which would not carry interest) or of PRT (which would)?
was it appropriate for the company to have brought a claim under CPR Part 8?
On the first question, the court had little difficulty in taking a different view from the High Court and deciding that the repayments were of APRT.
On the second question, the court ruled that it was an abuse of process to pursue a civil claim when the issues could have been determined under the normal appeal process (even though any appeal would need to have been made by a previous participator rather than the company). The court rejected the company’s argument that because the assessments in question had put both the amount chargeable to tax and the amount payable as zero, there was nothing against which an appeal could have been made. An appeal could be made against an assessment and the right to do so was not limited to an appeal against the amount of tax due. The assessment had included a ‘discharge’ (or repayment) figure and, as the dispute turned on the nature of the tax discharged, there was an issue ‘eminently suitable’ for decision by the FTT.
Why it matters: Although the subject matter of this case (whether HMRC should pay interest on overpaid PRT dating from the 1980s) is rather niche, it does show that sometimes finality in the tax system takes a very long time to achieve. The court’s decision on the abuse of process point is of wider interest, reinforcing the principle that where an issue can be resolved by appeal taxpayers cannot generally seek to pursue it in ordinary civil proceedings.
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