During the 1980s, Shell UK Limited and Esso Exploration and Production Limited (“the old participators”) paid advance petroleum revenue tax (“APRT”) and petroleum revenue tax (“PRT”) as participators in the Dunlin oil field in the North Sea. Losses having been incurred in respect of the field in more recent years, HM Revenue and Customs (“HMRC”) have made refunds. The substantive question raised by the present appeal is whether those refunds were entirely of PRT (as the respondent,

For a period during the 1980s, participators in certain oil fields were liable to pay both PRT and APRT. One such oil field was the Dunlin field, in respect of which the old participators made payments of APRT and PRT before, in 2008, selling their interests in the field. MCX was one of the purchasers and in time it also acquired, by way of forfeiture, the interest of the other purchaser.

Oil production from the Dunlin field ceased in the middle of 2015. By that stage, large losses had accumulated in respect of the field and these were carried back and served to reduce profits which the old participators had made from the field in the 1980s. As a result, HMRC made refunds to the old participators which, in accordance with the contracts under which they sold their interests in the field, the old participators have passed on to MCX. HMRC treated the refunds as attributable in part to PRT and in part to APRT. In so far as the repayments were considered to be of PRT, interest was paid. However, HMRC have denied any liability for interest on the balance of the refunds.

We were supplied by way of illustration with assessments relating to the Dunlin field for the period from 1 July 1986 to 31 December 1986. On 29 May 1987, Esso Exploration and Production UK Limited (“Esso”) was assessed as liable to PRT of £1,659,021 on the basis of an assessable profit of £6,129,942. After deduction of

On 12 February 2019, MCX issued a claim against HMRC in the High Court under CPR Part 8 seeking a declaration that the sums on which HMRC had refused to pay interest in fact carried it. The matter came before Fancourt J (“the Judge”) who, in a judgment dated 13 January 2020, concluded that he should grant a declaration as sought. He held that the totality of the sums which had been repaid to the old participators was overpaid PRT rather than excess APRT credit and so carried interest. He also rejected submissions on the part of HMRC that the Part 8 proceedings were an abuse of process or otherwise inappropriate for the grant of relief on procedural grounds.

HMRC now challenge the Judge’s decision in this Court.

PRT was introduced by the Oil Taxation Act 1975 (“OTA 1975”). By section 1(2) of that Act, a “participator” in an oil field is to be charged PRT on:

As section 1(2) indicates, sections 7 and 8 of OTA 1975 provide respectively, as their headings say, for “Relief for allowable losses” and “Oil allowance”. Section 7 states:

Where the Board have determined under Schedule 2 to this Act that an allowable loss has accrued to a participator in a chargeable period from an oil field, the participator may make a claim requiring that the loss be in the first instance set against any assessable profit which accrued to him from the field in any preceding chargeable period; and the assessable profit which so accrued to him in any such period shall then be treated as reduced by the amount of the loss, or by so much of that amount as cannot be relieved under this subsection against any assessable profit accruing to him from the field in a later chargeable period.

Where—

the Board have determined under Schedule 2 to this Act that an allowable loss has accrued to a participator in a chargeable period from an oil field; and

the winning of oil from that field has permanently ceased,

By virtue of section 1(5) of OTA 1975, schedule 2 to the Act has effect with respect to the management and collection of PRT. Paragraph 2 of schedule 2 obliges a participator to deliver to HMRC a return for each chargeable period. Paragraphs 1012B deal with assessments to tax and determinations of loss. Paragraph 10 provides for HMRC to make assessments and determinations, stating:

Where it appears to the Board that, in accordance with those provisions, an allowable loss has accrued to a participator in a chargeable period from a taxable field, they shall make a determination that the loss is allowable to the participator and shall give him notice of the determination.

Where it appears to the Board that, in accordance with those provisions, neither an assessable profit nor an allowable loss has accrued to a participator in a chargeable period, they shall make a determination to that effect and shall give him notice of the determination.

A notice of assessment for a chargeable period shall state the amount of any allowable losses which, in accordance with those provisions, have been set against the assessable profit for that period.

A notice of assessment or determination shall state that the participator may appeal against the assessment or determination in accordance with paragraph 14 below.

After the service of the notice of assessment or the notice of determination the assessment or determination, as the case may be, shall not be altered except in accordance with the express provisions of this Part of this Act (including the provisions applied by paragraph 1 above).”

that the assessable profit charged to tax by or stated in an assessment ought to be or to have been larger or smaller; or

that the allowable loss stated in an assessment or a determination of loss ought to be or to have been larger or smaller; or

that, where they made a determination that neither an assessable profit nor an allowable loss accrued in a chargeable period, they ought to have made an assessment to tax or a determination of loss for that period; or

that for any chargeable period they ought to have made an assessment to tax instead of a determination of loss or a determination of loss instead of an assessment to tax,

Where under sub-paragraph (1) above it appears to the Board that the assessable profit for a chargeable period ought to have been larger and that the deficiency resulted from an excessive allowable loss accruing in a subsequent period having been set against the profit for that period, the Board may (notwithstanding anything in section 34 of the Taxes Management Act 1970 (ordinary time limit for assessments)) make a further assessment by virtue of sub-paragraph (1) above at any time not later than six years after the end of the chargeable period in which the allowable loss accrued.

Where under this paragraph the Board make an assessment or determination or amend an assessment or determination they shall give notice thereof to the participator concerned; and subparagraphs (4), (5) and (6) of paragraph 10 above shall apply in relation to any such assessment, determination or amendment as they apply in relation to an assessment or determination under that paragraph.”

Paragraph 13 of schedule 2 to OTA 1975 provides that, subject to paragraph 14, tax charged in an assessment is due within six months after the end of the relevant chargeable period or, if later, 30 days after the date of issue of the notice of assessment. Paragraph 14 allows a participator to “appeal against an assessment or determination or an amendment of an assessment or determination made on or in relation to him by notice of appeal in writing given to HMRC within thirty days after the date of issue of the notice of assessment or determination or of the notice of the amendment”. Paragraph 14(3) permits a participator to withhold PRT while an appeal is pending. Paragraph 14(10) states:

because no, or a smaller, assessable profit or a, or a larger, allowable loss has accrued for the chargeable period in question; or

because a, or a larger, assessable profit or no, or a

Paragraphs 15-17 of schedule 2 to OTA 1975 relate to interest. Paragraph 15 provides for tax charged in an assessment to carry interest and paragraph 16 for interest “where any amount of tax charged by an assessment to tax or paid on account of tax so charged becomes repayable”. In its present form, paragraph 17 is in these terms:

an assessment made on a participator for a chargeable period or an amendment of such an assessment (in this paragraph referred to as ‘the relevant assessment or amendment’) gives effect to relief under subsection (2) or subsection (3) of section 7 of this Act for one or more allowable losses accruing in a later chargeable period (in this paragraph referred to, in relation to the relevant assessment or amendment, as ‘the relief for losses carried back’); and

the later chargeable period referred to in paragraph (a) above ends after 30th June 1991; and

an amount of tax becomes repayable to the participator by virtue of the relevant assessment or amendment (whether wholly or partly by reason of giving effect to the relief for losses carried back).

the relevant percentage of the amount of the allowable loss or losses referred to in sub-paragraph

the amount of an appropriate repayment.

where the repayment period ends on or before 30th June 1993, the relevant percentage, in relation to the amount of the loss or losses which is treated as reducing the assessable profit accruing to the participator for that period is 85 per cent.; and

in relation to the amount of the loss or losses which is treated as reducing the assessable profit accruing to the participator for any later repayment period, the relevant percentage is 60 per cent.

If, in order to give effect to the relief for losses carried back, a repayment of APRT falls, or will on the making of a claim fall, to be made with respect to a chargeable period which is the repayment period in relation to the appropriate repayment, the reference in sub-paragraph (4)(b) above to the appropriate repayment shall be construed as a reference to the aggregate of that repayment and the repayment of APRT.

In sub-paragraph (6) above ‘APRT’ means advance petroleum revenue tax paid under Chapter II of Part VI of the Finance Act 1982.”

Schedule 17 to the Finance Act 1980 (“FA 1980”) contains provisions relating to transfers of interests in oil fields. Paragraph 15 of schedule 17, headed “Terminal losses”, makes it possible for a loss incurred by a current participator to be used to reduce a predecessor’s assessable profits. It states:

such an allowable loss as falls to be relieved under section 7(3) [of OTA 1975] accrues to the new participator from the field in a chargeable period ending after 17th March 2004, but

some or all of the loss cannot be relieved under section 7(3) against assessable profits accruing to him from the field.

so much of it as cannot be relieved in accordance with sub-paragraphs (3) to (6) below, exceeds

the aggregate of any relevant previous participators’ expenditure unrelated to the field (see sub-paragraphs (10) and (11) below).

PRT is taken into account when assessing a participator’s liability to corporation tax. In the 1980s, following the advent of APRT but before the Income and Corporation Taxes Act 1988 (“ICTA 1988”) took effect, OTA 1975 included a section 17 in these terms:

the accounting period of the company in or at the end of which the chargeable period for which that tax was charged ends; or

if that chargeable period ends after the accounting period of the company in or at the end of which the trade giving rise to the income referred to above is permanently discontinued, that accounting period.

APRT was introduced by chapter II of part VI of the Finance Act 1982 (“FA 1982”). It replaced supplementary petroleum duty, which had itself come into being pursuant to the Finance Act 1981. Section 139 of FA 1982 provides for a “participator” in an oil field to pay “an amount of petroleum revenue tax (to be known as ‘advance petroleum revenue tax’ and in this Chapter referred to as ‘APRT’)” on the “gross profit” accruing to him from the oil field in a “chargeable period”. The first relevant “chargeable period” ran from January to June of 1983 and each subsequent half year was also to be a “chargeable period”. In the event, there were only eight chargeable periods as APRT ceased to be levied with effect from the end of 1986.

There is provision for APRT to be set against liability for PRT and for any excess to be carried forward. Thus, section 139 of FA 1982 (as amended by the Finance Act 1983), which lies at the heart of the present appeal, states:

any APRT which is payable and paid by a participator in respect of any chargeable period and not repaid, and

any APRT which is carried forward from the previous chargeable period by virtue of subsection (4) below,

any APRT which is payable and paid by a participator for that period and not repaid, and

any APRT carried forward from the previous chargeable period by virtue of this subsection,

Section 142 of FA 1982 concerns, in the words of its heading, “Consequences of crediting APRT against liability for petroleum revenue tax”. It reads as follows:

that any amount of APRT credit which has been set off against a participator’s assessed liability to petroleum revenue tax for any chargeable period ought not to have been so set off, or that the amount so set off has become excessive, or

that, disregarding any liability to or credit for APRT, a participator is entitled to a repayment of petroleum revenue tax for any chargeable period,

Pursuant to section 139(6) of FA 1982, section 139 is supplemented by schedule 19 to the Act. Paragraph 1 of schedule 19 requires a participator in an oil field to deliver to HMRC a statement showing whether any, and if so what, APRT is payable for a chargeable period and, subject to the following provisions of the schedule, to pay that amount. Where it appears to HMRC that any APRT payable in accordance with paragraph 1 has not been paid, paragraph 5 enables them to make an assessment to tax on the participator. Paragraph 6 empowers HMRC to amend or withdraw an assessment. Paragraph 7 of schedule 19 contains provision for appeals.

Paragraphs 9 and 10 of schedule 19 to FA 1982 are concerned with overpayments and interest. Paragraph 9 stipulates that, where a participator in an oil field has paid “an amount of APRT for a chargeable period which exceeds the amount of APRT payable therefor” or instalments exceeding his liabilities, the excess is to be repaid to him. Under paragraph 10, such an amount is to:

two months after the end of the chargeable period in respect of which the APRT or the instalment was paid, or

the date on which the amount was paid,

Paragraph 14 of schedule 19 to FA 1982 deals with repayment of APRT. As amended by the Finance Act 1983, paragraph 14 reads as follows:

For the purposes of this paragraph there is an excess of APRT credit for the ninth chargeable period referred to in subparagraph (1) above if any of that credit would, apart from this paragraph, fall to be carried forward to the next chargeable period in accordance with section 139(4) of this Act; and the amount of the excess is the amount of the credit which would fall to be so carried forward.

A claim under sub-paragraph (1) above shall be made not earlier than two months after the expiry of the ninth chargeable period referred to in that sub-paragraph.

Paragraph 10(4) above shall not apply to any amount of APRT which is repayable only on the making of a claim under sub-paragraph (1) above.

Amounts repaid to a participator by virtue of this paragraph shall be disregarded in computing his income for the purposes of income tax or corporation tax.”

There are two issues:

Were the repayments on which HMRC have declined to pay interest of APRT or PRT?

Was it appropriate for MCX to bring a claim under CPR Part 8?

As already mentioned, the Judge determined both issues in favour of MCX. With regard to the first of them, he arrived at this conclusion in paragraph 48 of his judgment:

Logically, it might make sense to address the procedural point before the substantive one. Like the Judge, however, I find it convenient to take the substantive issue first.

Section 139(3) of FA 1982 provides for APRT to be set against a participator’s liability for PRT. It was on that basis that, when Esso was assessed as liable to PRT of £1,659,021 in respect of the period from 1 July 1986 to 31 December 1986, the amount payable was reduced by £422,061 on account of “APRT credit”. Once, however, oil production from the Dunlin field had ceased in 2015, losses which had by then accrued fell to be carried back pursuant to section 7(3) of OTA 1975 (supplemented, since the old participators had long since ceased to be such, by paragraph 15 of schedule 17 to FA 1980). The result, as regards for example the period between July and December of 1986, was that the assessable profits which had previously been considered to have accrued to the old participators were extinguished and the PRT chargeable for the period was reduced to nil.

It is HMRC’s case that the carry back of losses had implications not only for the old participators’ liability for PRT, but for the extent to which APRT is to be viewed as set against PRT under section 139(3) of FA 1982. Mr David Ewart QC, who appeared for HMRC with Miss Elizabeth Wilson, submitted that, when the PRT charged to the old participators was reduced, the APRT set against it was as well. Under section

In contrast, MCX’s case, which the Judge accepted, is that everything that was repaid to the old participators was PRT rather than APRT. Mr David Goldberg QC, who appeared for MCX, argued that, once APRT has been used to discharge a liability to PRT, it cannot be turned back into APRT. If the PRT liability is subsequently reduced, with the result that tax must be repaid, the repayment will necessarily be of PRT, not APRT. When losses are carried back, earlier profits are treated as reduced, but the reduction takes place when the loss relief is given. The consequences are determined by reference to past events, but the application of the relief does not change history. It remains the case, Mr Goldberg submitted, that there were profits and that APRT was set against PRT due on them. APRT cannot be both paid and unpaid in the manner of Schrödinger’s cat.

Both sides sought support for their submissions in the case law. For his part, Mr Ewart cited Elf Enterprise Caledonia Ltd v Inland Revenue Commissioners [1994]

Mr Ewart stressed that Sir Donald Nicholls spoke of the carrying back of a loss triggering repayment of APRT as well as PRT. On the other hand, Mr Goldberg, who was himself one of the counsel in Elf, said that he did not remember there being any issue in the case about repayments of APRT and Sir Donald Nicholls’ remarks were not on any view necessary to his decision.

Mr Ewart also referred us to Procter & Gamble Ltd v Taylerson [1988] STC 854 (Vinelott J) and [1990] STC 624 (Court of Appeal) (“Procter & Gamble”) and

In Procter & Gamble, the taxpayer company had made a claim in 1979 under section 85(3) of FA 1972 to carry back surplus ACT to the previous accounting period. In 1982, the company incurred losses which it elected to set off against its profits for the three preceding years, thus reducing the 1979 profits. The issue in the case was whether the claim which the company had made to carry back surplus ACT extended to extra surplus ACT which was said to have arisen with the reduction in the 1979 profits. Vinelott J rejected the company’s contentions, and his decision was upheld by the Court of Appeal. However, both Vinelott J and the Court of Appeal proceeded on the basis that the carrying back of the losses had served to increase surplus ACT. Vinelott J said at 866 that the deduction of losses from the profits of the year to 30 June 1979 “of course, reduced the amount of ACT that could be set off against the corporation tax paid for that year and so increased the surplus ACT”.

Mr Ewart pointed out that the wording of section 85(1) of FA 1972 was very similar to that of section 139(3) of FA 1982, suggesting that, if a carry back of losses could result in less ACT being set against liability to corporation tax and so in increased surplus ACT, a carry back of losses could similarly result in less APRT being set against liability to PRT and so in increased APRT credit. However, Mr Goldberg argued that there are significant differences between APRT and ACT and, perhaps more importantly, neither Vinelott J nor the Court of Appeal was asked to rule in Procter & Gamble on whether surplus ACT had been increased by the carrying back of losses. It seems, rather, to have been common ground that that was the position.

Turning to Prudential, one of the issues in that case was whether a claim for restitution lay to recover ACT which had been set against “mainstream” corporation tax (“MCT”) in circumstances in which the MCT, but not the ACT, had been levied contrary to European Union law. By the relevant times, section 85(1) of FA 1972 had been superseded by section 239(1) of ICTA 1988, but there was no material difference between the two provisions. Lord Reed, Lord Hodge and Lord Mance explained HMRC’s case in these terms in paragraph 94 of their judgment:

Having noted in paragraph 98 that the Supreme Court was “concerned with ACT which is unquestionably lawful but which has purportedly been set against an unlawful MCT charge”, Lord Reed, Lord Hodge and Lord Mance said in paragraph 101:

Mr Ewart argued that the present case is analogous. However, he also fairly noted that it had not been argued in Prudential that the ACT had been irrevocably transformed into MCT. As, moreover, Mr Goldberg observed, the analogy between the present case and Prudential is by no means exact. In the present case, PRT liabilities were reduced as a result of losses in later years being carried back. In Prudential, by contrast there was never a true liability to MCT at all.

The upshot, I think, is that Elf, Procter & Gamble and Prudential lend a degree of support to Mr Ewart’s submissions, but (as Mr Ewart accepted) there is no question of their providing binding authority on the issue before us.

For his part, Mr Goldberg took us to Marshall v Kerr [1995] 1 AC 148 and Burton v Mellham [2006] UKHL 6, [2006] 1 WLR 2820. Mr Goldberg submitted that Marshall v Kerr illustrates that you do not ignore what has happened in the past when applying a deeming provision. However, the facts of Marshall v Kerr were far removed from those of the present case and, to my mind, the decision is principally notable for Lord Browne-Wilkinson’s endorsement at 164 of the following passage from the judgment of Peter Gibson J in the Court of Appeal:

Turning to Burton v Mellham, the taxpayer company there had failed to pay some ACT, but, had there been due payment, the sum in question would have been taken into account in determining the company’s liability to MCT nine months later. The issue before the House of Lords concerned the extent to which the company was liable for interest on the ACT under section 87(1) of the TMA 1970, which provides for tax to carry interest “from the date when the tax becomes due and payable until payment”. HMRC contended that there had never been “payment” of the relevant ACT. As, however, Lord Walker noted in paragraph 19, HMRC’s approach implied that “a failure to pay tax should carry a statutory liability to pay interest forever afterwards, if the principal liability is discharged or satisfied otherwise than by payment”, a proposition which Lord Walker unsurprisingly thought “so startling as to suggest that it would be a good reason for construing the statute more flexibly”. Lord Walker went on to observe in paragraph 20 that section 246N(2) of ICTA 1988, in “a clear echo of the familiar process under s 239(1) of the 1988 Act”, “treat[ed] a payment of ACT by a company to the Revenue as discharging in advance a liability for MCT to be paid by the same company to the Revenue” before expressing the view in paragraph 23 that there “is no good reason why ‘payment’ in s 87(1) [of the TMA 1970] should not include other forms of discharge or satisfaction”.

Mr Goldberg said that Burton v Mellham indicates that PRT can be considered to have been “paid” where APRT is set against liability for PRT under section 139(3) of FA 1982. That may be so, but I do not think the point matters in the context of the present appeal, where the central question is whether APRT should still be considered to be set against a liability to PRT when there has ceased to be any such liability.

In that connection, Mr Goldberg relied on the “then” to be found in section 7(3) of OTA 1975. Section 7(3) states that “Where … the Board have determined … that an allowable loss has accrued to a participator in a chargeable period from an oil field; and … the winning of oil from that field has permanently ceased, then so much of that allowable loss as cannot … be relieved against assessable profits accruing to the participator from the field shall be relieved … by treating the assessable profit accruing to him from the field in any chargeable period as reduced by the amount of the loss, or by so much of that amount as cannot be relieved … against the assessable profit so accruing to him in a later chargeable period” (emphasis added). Mr Goldberg argued that the “then” indicates that a loss is to be treated as reducing profit only when the relief is given, not with retrospective effect. In my view, however, the

The answer to that question according to MCX is, of course, “No”: a set off under section 139(3) of FA 1982 is permanent. However, Mr Goldberg himself accepted that such a set off might be affected by a correction to a company’s APRT position. Suppose that APRT of a certain amount was set against PRT and it was subsequently discovered that the company had only been liable for a lesser amount of APRT. Mr

On balance, it seems to me that the better view is that the extent (if any) to which APRT is to be considered to be set against PRT under section 139(3) of FA 1982 can also be revisited where liability to PRT is cut or extinguished as a result of a loss being carried back under section 7(3) of OTA 1975. Section 139(3) of FA 1982 provides for APRT to be set against “liability for petroleum revenue tax charged in any assessment”. I can see no good reason why that provision should be applied by reference to an assessment that has since been superseded. Just as the impact of section 139(3) may be affected by a reduction in APRT “payable and paid”, so may it be affected by a reduction in “liability for petroleum revenue tax charged in any assessment”.

Liability to PRT depends on assessments. PRT is payable only after an assessment has been issued: see paragraph 13 of schedule 2 to OTA 1975. For so long as an assessment stands, it will be conclusive, but if a new assessment is substituted under paragraph 12 or paragraph 14 of schedule 2 that will itself be determinative. Once, therefore, the PRT for a chargeable period has been assessed in a lower amount, that will be definitive and fix the amount of PRT against which APRT can be set under section 139(3) of FA 1982. The fact that a now invalidated earlier assessment gave a higher PRT figure, implying the setting off of more APRT, will be immaterial.

That analysis is consistent with Elf, Procter & Gamble and Prudential. More significantly, perhaps, its correctness is suggested by considering some hypothetical situations. As I have mentioned, four assessments were issued to Esso during the 1980s and 1990s in respect of the Dunlin field for July-December 1986 as the assessable profit was adjusted up and down. Suppose that the first assessment had proceeded on the basis that there was an assessable profit of, say, £400,000 which was fully discharged from APRT and that, subsequently, the profit had been corrected to £395,000. On Mr Ewart’s case, the amount of APRT set against PRT would similarly be reduced by £5,000 and the excess APRT carried forward correspondingly increased by £5,000. On Mr Goldberg’s case, in contrast, the initial £400,000 would be set in stone and Esso would be entitled to a repayment of £5,000 with interest. That would seem particularly odd when (a) the change in profit from £400,000 to £395,000 might have been necessitated by a mistake on Esso’s part and (b) there would have been no question of Esso receiving interest on the £5,000 if it had given its profit as £395,000 in the first place.

Suppose now that APRT had been set against a company’s PRT in 1983 but that in 1985 the company had incurred losses which, when carried back, cancelled out the profit on which PRT had been charged in 1983. On Mr Goldberg’s case, HMRC would have been obliged to refund the amount of the PRT plus interest. If, on the other hand, no assessment had been made for the relevant 1983 period by the time the company made losses in 1985, no APRT would ever have been set against PRT and excess APRT would have been carried forward. Likewise, if an appeal against an assessment for the 1983 period had still been pending when the 1985 losses emerged, the 1983 assessment could have been revised to show no liability to PRT and, once again, there would have been no set off of APRT. The outcome would thus have depended on accidents of timing.

Now imagine that a company is assessed to PRT of £1 million for each of two successive chargeable periods and that the liabilities are discharged from APRT of £2 million which had been carried forward to the earlier of the periods. If it were later realised that the company had made larger profits and so was liable for PRT of £2 million rather than £1 million for the first period, all the APRT should, on the face of it, be set against that £2 million liability pursuant to section 139(3) of FA 1982, with the result that there would after all be no APRT to carry forward to the next period and the company would have to pay the PRT for that period in cash. In other words, the £1 million of APRT which had hitherto been thought to be set against the PRT for the second period should now be set against PRT for the first period. Yet, on Mr Goldberg’s case, a set off cannot be undone.

The Judge said in paragraph 46 of his judgment that the following difficulty arises from HMRC’s case:

In my view, however, the Judge was mistaken in seeing any problem for HMRC’s case here. Section 17 of OTA 1975 provides for PRT to be deducted when computing a participator’s income for corporation tax purposes and, by virtue of section 17(1A),

As he explained in paragraph 47 of his judgment, the Judge also perceived HMRC’s case to face this difficulty:

I do not think, however, that the Judge was right about this. The approach for which HMRC contend does not in fact involve “partial” “re-writing of history”. The position is rather that, if the carrying back of losses has served to reduce or extinguish a PRT liability and, hence, the amount of APRT set against PRT, the extra APRT is carried forward to subsequent chargeable periods and, if still unused at the end of the ninth chargeable period, falls to be repaid pursuant to paragraph 14 of schedule 19 to FA 1982. Where, as in the present case, the relevant losses post-date the ninth chargeable period, it will in fact necessarily be the case that the additional APRT will not have been used by the end of that period since carried back losses are set against later periods before earlier ones.

In the circumstances, I respectfully take a different view from the Judge. It seems to me that the repayments on which HMRC have declined to pay interest were of APRT, not PRT.

Where a matter can be raised by way of an appeal to the First-tier Tribunal (Tax Chamber) (“the FTT”), it is generally an abuse of process to seek to pursue it in ordinary civil proceedings. As the Court of Appeal explained in Knibbs v Revenue and Customs Commissioners [2019] EWCA Civ 1719, [2020] 1 WLR 731 at paragraph 17:

In Autologic Holdings plc v Inland Revenue Commissioners [2005] UKHL 54, [2006] 1 AC 118, which was decided when the FTT had not yet been established and tax appeals lay to commissioners, Lord Nicholls said this about the “exclusive nature of the appeal commissioners’ jurisdiction to decide certain types of disputes arising in the administration of this country’s tax system”:

Clearly the purpose intended to be achieved by this elaborate, long established statutory scheme would be defeated if it were open to a taxpayer to leave undisturbed an assessment with which he is dissatisfied and adopt the expedient of applying to the High Court for a declaration of how much tax he owes and, if he has already paid the tax, an order for repayment of the amount he claims was wrongly assessed. In substance, although not in form, that would be an appeal against an assessment. In such a case the effect of the relief sought in the High Court, if granted, would be to negative an assessment otherwise than in accordance with the statutory code. Thus in such a case the High Court proceedings will be struck out as an abuse of the court’s process. The proceedings would be an abuse because the dispute presented to the court for decision would be a dispute Parliament has assigned for resolution exclusively to a specialist tribunal. The dissatisfied taxpayer should have recourse to the appeal procedure provided by Parliament. He should follow the statutory route.

I question whether in this straightforward type of case the court has any real discretion to exercise. Rather, the conclusion that the proceedings are an abuse follows automatically once the court is satisfied the taxpayer’s court claim is an indirect way of seeking to achieve the same result as it would be open to the taxpayer to achieve directly by appealing to the appeal commissioners. The taxpayer must use the remedies provided by the tax legislation. This approach accords with the views expressed in authorities such as Argosam Finance Co Ltd v Oxby [1965] Ch 390, In re Vandervell’s Trusts [1971] AC 912 and, more widely, Barraclough v Brown [1897] AC 615.”

In the present case, Mr Ewart submitted that the question whether the repayments made by HMRC were wholly of PRT or represented both PRT and APRT could have been the subject of appeal to the FTT and that it was an abuse of process for MCX to seek to have it determined in ordinary civil proceedings. It is nothing to the point, Mr Ewart said, that any such appeal might have had to have been brought by an old participator rather than MCX. It was for the old participators and MCX to make appropriate arrangements in that regard between themselves, for example by including in the agreements under which the old participators transferred their interests in the Dunlin field provision for the old participators to issue appeals at MCX’s request. The fact that, as a result of contractual arrangements with the old participators, it is MCX rather than the old participators which stands to gain from the present litigation cannot have entitled MCX to institute civil proceedings where it would not have been proper for the old participators to do so.

Mr Goldberg’s answer, which the Judge accepted, was that this dispute could never have been the subject of an appeal to the FTT. The Judge said this in his judgment:

A further amended assessment dated 18 December 2015 made a nil assessment on the basis that all except a small part of the assessable profits was reduced by allowable losses, with the final small part reduced by oil or exempt allowances. This amended assessment said nothing about the amount of tax to be repaid. In any event, I accept Mr Goldberg’s submission that it is no part of an amended assessment of liability to calculate a repayment of tax (or interest) that is due, even if it might helpfully include such information. The old participators therefore could not have appealed the December 2015 amended assessment on the ground that HMRC did not pay full interest on the repaid tax.

Accordingly, I reject the argument that the old participators could and should have appealed one or other of the amended assessments, if they wished to challenge a decision made by HMRC about what sums were to be repaid.”

Supporting the Judge’s conclusions, Mr Goldberg argued that there was nothing for the recipient to appeal against in the 26 August 2015 assessment. It put both the

On balance, however, I agree with Mr Ewart that the old participators could have appealed. Paragraph 14 of schedule 2 to OTA 1975 allows a participator to appeal “against an assessment”. An “assessment” will show what, if any, amount of tax is said to be due, but I cannot see why the right to appeal should be limited to that figure. In fact, the Judge himself evidently accepted that it would also be possible to appeal “the appropriateness of the use of allowances rather than allowable losses to set against assessable profits” and a participator could potentially have very good reason to contest such a point. To my mind, it would have been equally possible to appeal the fact that the 26 August 2015 assessment gave the “Discharge” figure as £1,157,973 when on MCX’s case the correct figure would have been £422,061 higher to take account of the APRT which had previously been set against PRT. It was implicit in that part of the assessment that HMRC saw £422,061 of the tax that they were repaying as APRT rather than PRT. Whether they were right to do so was an issue eminently suitable for decision by the FTT, and in my view it could have been the subject of an appeal to the FTT.

In the circumstances, it seems to me that the present proceedings were an abuse of process. Parliament has laid down a statutory appeal process by which PRT assessments can be challenged. The question whether HMRC’s refunds were due by way of discharge of PRT payments could have been determined using that procedure and, that being so, MCX should not have resorted to ordinary civil proceedings.

I would allow the appeal.

I agree.

I also agree.