The Inland Revenue plans to take its its legal battle with John Lewis over tax payments to the House of Lords, bypassing the Appeal Court.
The announcement follows a High Court ruling yesterday in which a judge upheld John Lewiss claim that it should not pay a higher rate of tax for the sale of rental rights to its property. Further claims, thought to amount to £700m, hinge on the outcome of the case.
In November 1995, John Lewis Properties sold for £25.5m its right and interest in recovering the rent on a number of buildings owned on long leases for a five-year period to Cooperative Centrale Raiffeisen-Boerenleenbank BA.
The tax commissioners argued that the sale of the right to rent payments from the buildings, which were let to John Lewis for High Street stores, should be taxed on income receipt, rather than capital receipt, entitling the Inland Revenue to recover a higher percentage of tax.
However, Mr Justice Lightman upheld the Special Commissioner’s earlier decision that money received by John Lewis Properties amounted to capital receipt. He said that while he had sympathy with the Commissioners, whose argument was based on the Australian system, he considered that according to English law he should find in favour of John Lewis. Any change in the law should come from Parliament rather than the judges, he said.
In rejecting the Commissioners claims the judge said: “This appeal raises for the first time the efficacy as a tax avoidance scheme of a rent factoring scheme of a type widely marketed in the mid 1990s for obtaining relief from liability for tax.”
EGi News 14/06/01
