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Robert

As far as I understand it, there is little or no reason a group would not choose the delay - there is no benefit in paying the tax early. The reason for the "election" seems to be twofold. First it is part of the IR's trend towards "hand ups" rather than "hand outs". Second, by requiring the election to be made, rather than providing an automatic exemption, the IR receives information on the payment earlier than it would otherwise do so through tax returns and so this increases their own certainty in receipts.

As for the question of whether the tax was "due" - I agree that the tax was in fact not due because no election was made. However, to allow this to prevent the claim poses two problems as far as I can see.

First, the ECJ clearly requires a claim to be possible (further to Metallgesellschaft).

Second, this would provide the IR with far too neat a method of escaping liability in all cases.

Best
Monica

On Mon, 16 May 2005 12:24:04 +0100 Robert Stevens wrote:

I have a question concerning Deutsche Morgan Grenfell v IRC. It is a tax question and one I am not competent to answer. Can anyone answer it? (Offlist if preferred).

Under section 247 of the Income and Corporation Taxes Act 1988 the law is that where a parent receives a dividend from its parent they can make a 'group income election.' If they make the election then Advance Corporation Tax is not payable. If they don't make the election, the Advanced Corporation Tax is payable but is set off against mainstream corporation tax payable later. So making the election means that payment of the tax is delayed.

My question is whether there is any good reason why a company/group which can make the election would choose not to do so? I can see why you would choose to pay later, but why choose to pay earlier?

If you do have to choose/elect before getting the delay, I cannot see how the CA's conclusion that the tax was not due can be correct.