A Gateshead-based heating manufacturer has lost a High Court challenge over a tax claim on dividend income received more than two decades ago.
Rettig Heating Group Ltd, now in liquidation, sought a judicial review after HMRC refused to extend a statutory time limit to offset a non-trading loan relationship deficit (NTLRD) against profits from overseas dividends received in 2002.
Under Section 83(6) of the Finance Act 1996, HMRC can, at its discretion, extend the standard two-year window for such claims. However, Rettig’s application to do so in 2021 was rejected.
Mr Justice Edwin Johnson last week dismissed the firm’s application for judicial review, ruling that Rettig had failed to show the decision was irrational or based on an error of law.
The company received £1.23m in dividends from an Irish subsidiary during the year ending 31 December 2002. At the time, it had a deficit of £2.67m in its loan relationships.
Rettig’s 2004 tax return initially treated the dividend income as taxable, using £1.13m of the deficit to offset profits. The remaining balance was surrendered to group company Purmo (UK) Ltd. Later that year, Rettig amended its return to treat the dividends as exempt under EU law and withdrew its claim.
A statutory enquiry into the amended return was opened by HMRC in December 2005.
The company argued that it had only become aware the dividends were taxable following the conclusion of the long-running Franked Investment Income litigation in 2021. It then attempted to revive its claim under the extended timeframe.
HMRC refused the request, saying there were no exceptional circumstances preventing Rettig from making the claim within the original two-year window, which expired on 31 December 2004.
In his ruling, Mr Justice Johnson said: “It seems perverse to describe this chain of events as one where the deficit claim could not have been made within the statutory time limits for reasons beyond the claimant’s control.”
Rettig is now liable for £123,000 in corporation tax.
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Nicola Harley