Scottish Court of Session Decisions

[1] This action was appointed to the procedure roll on the pursuer's seventh plea-in-law and her first plea-in-law in the counter-claim. The pursuer was appointed to lodge a Note of Argument within 28 days from the date on which the case was sent to the procedure roll (9 May 2001); and the Note of Argument was duly lodged on 5 June 2001. The arguments advanced on behalf of the Advocate General, were precisely those foreshadowed in the Note of Argument and reference is made to that note and to the arguments contained therein. Miss Paterson, Advocate, appeared for the pursuer. The defender appeared as a party litigant. He is designed as an accountant.

[2] In the action, the pursuer sues for and on behalf of the Commissioners of Inland Revenue. In the first conclusion annexed to the Summons, the pursuer seeks payment by the defender of specified sums of income tax and Class 4 contributions. Article 2 of the Condescendence, under reference to number 6/1, 6/2 and 6/3 of process, discloses that the amounts of income tax and Class 4 contributions remaining payable and unpaid, and embraced in the first conclusion, are in respect of years of assessment 1996/97, 1997/98, and 1998/99. Article 3 of the Condescendence relates to the sum claimed in the second conclusion annexed to the Summons; the sum due was in respect of the years of assessment 1999/000. The third conclusion is for payment of interest on the sums contained in the first two conclusions. The fourth conclusion is in respect of a surcharge exigible and payable following the failure of the defender to make payment of the sums referred to in the first and second conclusions. Conclusion 5 relates to the interest payable on that surcharge. The condescendence annexed to the Summons fully explains the basis of all these claims, under reference to the certificates referred to in the pleadings and lodged in process, and also to the provisions of Section 70 of the Taxes Management Act 1970. The relevant part of Section 70(1) of the Taxes Management Act 1970 is quoted in Article 1.1 of the note on the line of argument. It has the effect that each of the certificates lodged in processes as 6/1, 6/2, 6/3, and 6/4, "shall be sufficient evidence that the sum mentioned in the certificate is unpaid and is due to the Crown". Counsel for the pursuer referred the Court to the case of IRC v Findlay McClure & Co 1986 S.L.T. 417 where Lord Allanbridge held that, in the absence of any valid challenge to such certificates, the Court could regard such certificates as a proper basis for the granting of the decree de plano against the tax payer. In the present instance, counsel for the pursuer pointed out that the certificates in question were not challenged or disputed in any way in the defender's pleadings. Nor was there any challenge to the computation of the sums giving rise to the certificates, the amounts therein or the calculation of interest. There was no averment by the defender that any of the sums due had at any time been paid. The only response of the defender was that contained in Answer 2 of the defences. The first allegation there was that "losses incurred by the defender have not been offset against later income". In accordance with the arguments contained in the note on the line of argument, counsel for the pursuer pointed out that the loss referred to by the defender, assuming there was any such loss, must have occurred before the end of the tax year 1989/90. The defender had not averred any legal basis for setting off the alleged loss, but the only possible basis for setting off any such loss was that contained in Section 574 of the Income and Corporation Taxes Act 1988. However, no relief under that section could be claimed for an allowable loss occurring in 1989/90 against income for the year of assessment 1996/97 and later years. Counsel also referred to Article 3 of the Condescendence in respect of the claim due and set forth in certificate 6/4. The defender advanced exactly the same challenges to this claim. When he came to reply to the debate, the defender accepted at once that he could not make a claim for relief against the sums referred to in certificates 6/1, 6/2, 6/3 and 6/4, having regard to the fact that these certificates related to years from 1996 onwards and his claimed loss related to the year 1989/90.

[3] The defender did, however, seek to argue that the certificates themselves were invalid, because Section 70 of the Taxes Management Act 1970 referred to "tax in arrears" and did not refer to Class 4 contributions, which were specified in the certificates lodged. However, in reply, counsel for the pursuer pointed out that Section 16 of the Social Security Contributions and Benefits Act 1992 provided that all provisions of the Income Tax Acts, including the relevant provisions of the Taxes Management Act 1970, were to apply with the necessary qualifications to Class 4 contributions under the 1992 Act "as if those contributions were income tax chargeable under Case I or Case II of Schedule D." In these circumstances, this point, of which no advance notice was given by the defender, is an unsound point.

[4] The defender argued that when he went to the Paisley tax office to enquire if the losses that he had sustained in or about 1989, following the liquidation of the company referred to in Answer 2, would be able to be offset against any other income for that or subsequent tax years, he was (as stated in Answer 2) given unsound advice by an officer of the Inland Revenue on duty in that office. The result was that he was effectively deprived of funds which he would have had been able to claim and with which he would have been able to meet other tax liabilities as they fell due. However, he frankly accepted that this possible claim was not an answer to the pursuer's claim based upon the certificates. He acknowledged that this claim put forward in Answer 2 was really a claim that should have been advanced by way of a counter-claim, if it could be advanced at all.

[5] Counsel for the pursuer advanced a separate argument in support of her first plea-in-law in the counter-claim. In particular, she pointed out that in terms of Section 35(2) of the Crown Proceedings Act 1947, a person was not entitled to avail himself of any set-off or counter-claim in any proceedings by the Crown for the recovery of taxes, duties or penalties, or to avail himself in proceedings of any other nature by the Crown of any set-off or counter-claim arising out of a right or claim to repayment in respect of any taxes, duties or penalties. She also advanced a number of other arguments in relation to the defender's averments in the counter-claim. However, when the defender came to reply, he accepted that he could not proceed with the counter-claim, standing the terms of Section 35 of the 1947 Act. Thus there was no need for him or for the Court to address the other arguments about the relevancy of the counter-claim.

[6] In effect, therefore, the defender frankly acknowledged that his defences were ill-founded and his counter-claim could not be advanced. In these circumstances, it is plain that the pursuer is entitled to have the defences repelled in terms of her seventh plea-in-law annexed to the Summons and the counter-claim dismissed in terms of her first plea-in-law in the counter-claim. It is also plain, following the decision of Lord Allanbridge referred to, that the pursuer is entitled to decree de plano. I shall therefore sustain her pleas-in-law and grant decree de plano in terms of Conclusions 1-5 of the Summons.

[7] The sixth conclusion, for the expenses of the action, will have to be dealt with in later procedure.