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Aberdeen Milk Co Ltd v IRC (Special Commissioners) 6 March 1998

Statutory interpretation. Carry back of surplus ACT. McGuckian principle applied.

The taxpayer was incorporated in 1993. Under Agriculture Act 1993, it was permitted to take over the trade and function of the Aberdeen and District Milk Marketing Board (“the Board”). The taxpayer paid a dividend in 1996, and sought to carry back the ACT and set it against the MCT paid by the Board in 1990. The Agriculture Act 1993, Schedule 2 para.1, provides that the taxpayer is to be treated for the purposes of the Corporation Tax Acts as having carried on the Board’s trade at times when the Board actually carried on that trade.

The Inland Revenue sought to deny set off of the taxpayer’s ACT against the Board’s MCT since the two were strictly speaking two different companies.

The Special Commissioners accepted the taxpayer’s argument that a purposive approach to construction (as explained in IRC v McGuckian [1997] STC 908) should be applied to Schedule 2 of the Agriculture Act 1993, and since it was clearly Parliament’s intention that the transfer of the trade from the Board to the taxpayer should be tax neutral, the carry back of ACT of the former to set against MCT of the latter was permitted.

Hugh McKay appeared for the taxpayer

See also Article by Nicola Shaw