© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
F5.Double taxation
- Parliament presumed not to intend
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"[25] My Lords, the presumption against double taxation is one facet of a wider common sense principle of the construction of statutes by which courts will often imply qualifications into the literal meaning of wide and general words in order to prevent them from having some unreasonable consequence which it is considered that Parliament could not have intended: see Stradling v Morgan (1560) 1 Pl 199 and, for a more recent example, R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] 2 WLR 1299. The strength of the presumption depends upon the degree to which the consequences are unreasonable, the general scheme of the legislation and the background against which it was enacted.
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[28] I do not think that it advances the argument to debate whether this is really a case of double taxation or not. The question is whether the Act authorised what actually happened, whatever you choose to call it. The inevitable consequence of the valuation regime created by the ESI Order was to make the sale of the power stations irrelevant to PowerGen's rate liability in the 1999-2000 rating year but to allow the rating authority to claim rates from Edison for the period of its occupation. As the latter is conceded to be lawful, the question is whether a valuation regime which takes no account of the disposal of hereditaments to a rateable occupier in a rating year is so unreasonable, viewed against the scheme of the 1988 Act and the background to its enactment, that Parliament cannot be supposed to have intended paragraph 3(2) of Schedule 6 to authorise it." (R (Edison First Power Limited) v. Central Valuation Officer [2003] UKHL 20)
"[107] If HMRC’s argument were right, the result in F S Securities would have been different. The dividends that were in dispute in that case derived from income of the three companies in which the taxpayer had bought shares (one of which appears to have been a wool merchant). Those three companies earned that income presumably in the course of a myriad of transactions with third parties. It fed into the calculation of their profit which was then taxed in their hands and the franked dividends were then paid to the taxpayer. The payment of the dividends was a completely different transaction between different parties from the transactions by which the income had been earned but the House of Lords still held that the no double taxation principle applied and the dividends were not taxable as income in the hands of the taxpayer shareholder.
[108] I would therefore dismiss HMRC’s appeal in relation to Garrard and allow the Appellants’ appeal to that extent. There is no basis for remitting the Garrard transactions to the FTT. The outcome of these proceedings so far as the tax treatment of Garrard is concerned is that the no double taxation principle applies to exclude from the computation of the income of the Appellants’ solo financial trades the amount of the profit that is already taxed in their 114(2) trades." (Investec Asset Finance Plc v. HMRC [2020] EWCA Civ 579, Rose LJ)
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"[53] In determining Parliament’s purpose, there is a general presumption that Parliament does not intend to legislate in a way that produces an unfair or unreasonable outcome. In R (on the application of Edison First Power Ltd) v Central Valuation Officer and another [2003] 4 All ER 209, a case alleged to constitute double taxation, Lord Millett put matters in the following terms at [116] and [117]:
“[The presumption against double taxation] is … a species of a wider genus, viz. the presumption that Parliament intends to act reasonably … The courts will presume that Parliament did not intend a statute to have consequences which are objectionable or undesirable; or absurd; or unworkable or impracticable; or merely inconvenient; or anomalous or illogical; or futile or pointless. But the strength of these presumptions depends on the degree to which a particular construction produces an unreasonable result. The more unreasonable a result, the less likely it is that Parliament intended it. … I do not, therefore, find it profitable to discuss whether the effect of the [Order] amounts to “double taxation”… I would prefer to go straight to the real question: whether the scheme established by the [Order] is so oppressive, objectionable or unfair that it could only be authorised by Parliament by express words or necessary implication.”" (HMRC v. Candy [2021] UKUT 170 (TCC), Mellor J and Judge Andrew Scott)
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“While s 385 appears to contemplate that more than one person could be subject to tax on the same dividend (for instance, where one person received it but another person was entitled to receive it), a better reading is that only one person is liable to tax on the same dividend. Any other reading gives rise to double taxation.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §78, Judge Mosedale).
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Double taxation​​
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- Taxing company and individual onward recipient from company not double taxation
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"[128]There is a presumption that Parliament does not intend to tax the same person on the same income twice unless it clearly and expressly legislates to the contrary. This is the principle of double taxation and Lord Macmillan explained the principle in Canadian Eagle Oil Company Limited v R (1945) 27 TC 205 (which was concerned with the rules for taxing foreign companies on income with a UK source) at 257: “The result of these considerations is to satisfy me that for the purposes of Income Tax, the income of a foreign company and the income received from it in dividends by its British shareholders are not to any extent or effect one and the same income, but are two distinct incomes. The fact that the foreign company’s total income is in part composed of British dividends which have borne tax by deduction is entirely irrelevant to the question of the tax to be paid by a British shareholder on the dividends received by him from the foreign company. There is no such identification of the British shareholder with the foreign company as there is between a British shareholder and a British company, and the attempted analogy is only misleading. The income of the foreign company and the income received in dividends from it by its British shareholder are in our revenue law the incomes of two different persons, and there can thus be no room for any invocation of the rule against double taxation, which applies only against taxing twice the same income of the same person.”
[129] In our judgment, the FTT’s conclusion that the present case did not involve double taxation (in the sense described by Lord Macmillan in Canadian Oil) was correct. The Corporate Partner and the IP Appellants were not the same person and they were not taxed on the same income. They were being taxed on income from separate sources. The Corporate Partner has been taxed on its profit allocation and the IP Appellants were chargeable to tax under Case VI on the receipts derived from the final PIP Awards based on the decisions made by the Corporate Partner. For these reasons we dismiss the IP Appellants’ appeal on the Miscellaneous Income Issue." (HMRC v. Bluecrest Capital Management LP [2022] UKUT 200 (TCC), Leech J and Judge Herrington)
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