Tim Crosley and Michael Walsh analyse the implications of HMRC’s defeat in Sempra
“Legal rules which are not soundly based resemble proverbial bad pennies: they turn up again and again.” The bad penny to which Lord Nicholls was referring was the “negative attitude of English law to awards of compound interest on claims for debts paid late” in Sempra Metals Ltd v IRC [2007] UKHL 34, [2007] All ER (D) 294 (Jul). In a complex and lengthy judgment where all five law lords had their say, the majority refused the appeal of HM Revenue & Customs (HMRC). The origins of the claim lie in the unlawful levying of advance corporation tax (ACT) by the UK government, but the decision is undoubtably of more general significance.
BACKGROUND
The UK required UK companies paying a dividend to pay ACT to HMRC from 1973 until its abolition in 1999. As the name suggests, ACT was an advance payment of corporation tax. ACT paid could be set off against the UK company’s normal liability to pay corporation tax (mainstream corporation tax (MCT)). The result of paying ACT
