Shop Direct Group v Revenue And Customs
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE RIMER
- SIR STANLEY BURNTON
Areas of Law
- Tax Law
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
Shop Direct Group's appeal regarding the assessment to corporation tax on a large VAT repayment and interest was dismissed. The court held that post-cessation receipts and interest payments constitute taxable sums, and the repayment amounts received by SDG arose from the carrying on of the discontinued trades, making them liable for corporation tax.
Judgment
Lord Justice Briggs :
This appeal represents the third stage of the (thus far unsuccessful) endeavour by Shop Direct Group (“SDG”) to challenge the assessment to corporation tax of a very large repayment of VAT, together with an even larger amount of interest thereon, both of which were received by SDG on 19 th September 2007. The repayment was £124,963,600 and the statutory interest thereon was £174,828,209. Both the repayment and the interest formed items in a series about which there were conjoined appeals by SDG and associated companies, within which they acquired the acronyms “VRP2” and “IP2”. They are however the only payments in the series in respect of which SDG has pursued its challenge to this court. I shall continue to use those acronyms, not least because they provide a useful link between this judgment, the Decision of the First-tier Tribunal (“FTT”) by Judge Berner and Miss O’Neill published on 14 th February 2012 and the judgment of Asplin J. in the Upper Tribunal (“UT”) released on 19 th April 2013.
SDG was assessed to corporation tax in relation to VRP2 on the basis that it was a post-cessation receipt under section 103(1) of the Income and Corporation Taxes Act 1988 (“ICTA”), by which it is chargeable under Case VI of Schedule D. It was assessed to corporation tax on IP2 on the basis that the interest payment represented a profit arising from a loan relationship within the meaning of the corporation tax version of Case III under section 18(3A)(a), by reason of the extended meaning given to “loan relationship” in section 100(1) of the Finance Act 1996. In both cases I refer to the provisions of those Acts as they were in force in 2007.
HMRC repaid VRP2 because it represented the aggregate of a series of overpayments of VAT many years previously by SDG and various other trading companies within the same VAT Group when the overpayments were made, pursuant to a statutory obligation to do so under section 80 of the Value Added Tax Act 1994. It made IP2 pursuant to a statutory obligation to do so under section 78 of that Act. The overpayments had been made between 1978 and 1996 inclusive. Only £200,000-odd of the overpayment was made by SDG itself. As to the balance, £72.8 million was overpaid by GUS Plc (“GUS”), £50 million by two companies, Kay & Company and Abound Limited (“Kay and Abound”), and £1.9million by Reality Group Limited (“RGL”). In their very helpful written submissions, Mr. David Goldberg QC and Mr. Michael Jones fo