UT/2024/000060 - [2025] UKUT 00143 (TCC)

The second alleged error is that HMRC’s Decision maker was wrong to make the unreasoned assumption that once it was decided that the overseas dividend was not exempt it automatically followed that the claim could and should be immediately made by the Claimant. The Deficit Claim could not be quantified until the FNR was agreed. If HMRC had not agreed the FNR at 10% a different quantified Deficit Claim would have been required in order to take account of that different agreed FNR figure.

This argument appears to raise the same issues as referred to above at [145], and is wrong for the same reasons. As already noted, the Claimant did not wait for the FNR to be agreed with HMRC before making the Deficit Claim. In the letter of 11^th March 2021, by which the Deficit Claim was made, the Claimant’s advisers specified that the FNR was 10%, which was the rate which applied to manufacturing income for the Irish-resident subsidiary company. Agreement on the FNR was not therefore something which in fact held up of the making of the Deficit Claim. Independent of this point, agreement on the FNR was not a pre-condition to making the Deficit Claim at an earlier date. It was open to the taxpayer as much as it was to anyone else to arrive at the correct legal analysis and specify the FNR (possibly as early as post CJEU FII 2 – see [137] above -and at the least once Prudential SC was issued in 2018). As such, there was no error of law and this ground of challenge falls away.

It is in any case also hard to understand how this second alleged error could be capable of giving rise to any ground of judicial review. In the relevant part of the Decision HMRC assumed, contrary to their conclusion in relation to Paragraph 10 of the SP, that the Deficit Claim should have been made once the Prudential cases had been determined; effectively as from 2018. The Deficit Claim was made in March 2021. The Claimant’s complaint in this context is that the Decision proceeded on the mistaken assumption that the Deficit Claim could and should be made immediately it was known that the Dividends were not exempt from the charge to tax. If, contrary to our view, the FNR had to be agreed with HMRC before the Deficit Claim was made, this would not invalidate the decision of HMRC on Paragraph 13. (The Decision is not challenged on the basis of a failure to give reasons). There was a delay between the decision of the Supreme Court in the Prudential cases and the making of the Deficit Claim. If the Claimant required the agreement of HMRC to the FNR before making the Deficit Claim, it was open to the Claimant to seek that agreement, as from 2018. If there was an error of law in this respect, it hard therefore to see how it was material to the decision of HMRC on Paragraph 13.