CA-2024-001898 - [2025] EWCA Civ 1392

Total tax

Total interest

Surplus ACT

£8,835,287.36

£11,435,963.18

£8,835,287.36

£11,435,963.18

FID Claim

£2,324,320.89

£2,324,320.89

£8,835,286.73

£13,760,284.07

Pursuant to the Summary Judgment Orders HMRC paid Evonik £6,379,879.54. This figure was computed by applying a 45% withholding tax under Part 8C of the Corporation Tax Act 2010 to a gross amount of £11,579,592.40. However, it was common ground both before the judge and us that for present purposes the withholding tax should be ignored and we should concentrate on the net figure, which for convenience I will refer to as £6.4m.

In economic terms the parties’ positions can be outlined in the following way. Evonik seeks to preserve the benefit of having received £6.4m on 23 March 2016. As discussed below this might be achieved in more than one way, but Evonik’s approach before the judge was to offset that figure against interest accrued (or, perhaps more accurately, now to be treated as accrued) in its favour as at that date. The effect would be that the full amount of surplus ACT (which for convenience I will refer to as £8.8m) continued to accrue interest under s.35A after 23 March 2016, up to the date of judgment. The amount of additional interest (up to May 2024) on the £8.8m is around £2.3m.

In contrast, HMRC maintain that FII SC3 requires the order for payment of the £6.4m to be unwound with restitution, and accompanying interest, in their favour. They say that Evonik’s approach wrongly treats a portion of the £6.4m as a partial discharge of its overall claim rather than a sum which Evonik has been found not to have been entitled to receive, because the relevant order has been set aside.

HMRC’s fallback is that even if such an approach were not possible then the only allocation available in respect of the £6.4m would be to the principal amount of Evonik’s claim, since there was no liquidated claim to interest in 2016. Thus, HMRC would allocate the £6.4m entirely to the surplus ACT of £8.8m. The effect would be that, from 23 March 2016, interest under s.35A would accrue not on £8.8m but on about £2.4m (£8.8m-£6.4m). This produces a figure of around £0.7m to May 2024.