Legal & General Assurance Society Limited v David Vivian Thomas

Facts

Legal & General Assurance Society Limited, a composite insurance company registered in England and Wales and engaged principally in life assurance and pensions business, appealed against estimated corporation tax assessments for its accounting periods for the calendar years 1990 to 1998; the Inland Revenue had also raised enquiries under paragraph 24(1) of Schedule 18 to the Finance Act 1998 for 1999 to 2001. The years 1992 and 1993 were chosen as representative. In every year the Crown's option was exercised so that the company's life assurance business was taxed on the "I minus E" basis rather than under Case I. The company's linked and non-linked funds held foreign shares and bonds, the bulk of the income from which arrived after deduction of foreign withholding tax. The company claimed credit for the whole of that foreign tax, under the applicable double taxation conventions or, where none applied, unilaterally under section 790 of the Income and Corporation Taxes Act 1988, against the total corporation tax on the aggregate I minus E amount; it also deducted a proportion of the foreign tax referable to pension business as an expense under section 82(1) of the Finance Act 1989. The Revenue contended that credit had to be restricted to the tax on a mini-Case I computation of the foreign income alone, and that pension business fell to be treated separately.