MXC Dunlin – Interest due on repayments of tax paid in the 1980s

26 February 2020

In MCX Dunlin (UK) Ltd v HMRC [2020] EWHC 11 (Ch), the High Court has held that interest was due on repayments of liabilities to petroleum revenue tax (PRT) dating from the 1980s, which had been met by crediting advance PRT (APRT).


In the 1980s, Shell UK Ltd and Esso Exploration and Production Ltd (the old participators) operated the Dunlin oil field in Scotland (the oil field). Profit they made was assessable to PRT, which was paid to HMRC.

In 2007, MCX Dunlin (UK) Ltd (MCX) bought interests in the oil field from the old participators and incurred substantial losses on winding down the production of oil from the oil field, which were allowable under the PRT regime.

In 2015, HMRC verified the allowable losses and issued tax refunds to the old participators relating to a three year period running from 1983. The old participators passed this money on to MCX, under the terms of their Sale and Purchase Agreements (SPAs).

The dispute in this case arose as HMRC paid the tax refunds with interest only where PRT had been paid by the old participators in cash. Where the PRT liability had been discharged by way of set-off from APRT previously paid, HMRC paid no interest.

MCX issued a Part 8 claim seeking a declaration from the High Court that HMRC should have paid interest on the repaid tax even when the PRT had been paid by way of set-off of APRT.

High Court decision

The declaration was granted.

The Court had to consider the following two issues:

(1)   whether the Court should decline MCX’s application for declaratory relief because the question of entitlement to interest is a matter between HMRC and the old participators and did not concern MCX; and

(2)   whether, as a matter of statutory construction, the repayment to which the old participators were entitled, was either overpaid PRT or excess APRT credit. If the repayment was of overpaid PRT, then it was common ground that interest was payable in respect of the overpaid PRT.

On issue (1), Fancourt J rejected HMRC’s argument that MCX’s interest was not sufficient. The interest was sufficient as it would be entitled to sums paid by HMRC to the old participators under the SPA. Further, the old participators could not have appealed against assessments made by HMRC where the tax chargeable had been reduced to nil. There was no exercise by HMRC of a discretion or judgment in a public law sense which would have been appropriate for judicial review. Tthe dispute was purely about the meaning and effect of a tax statute and therefore appropriate to be determined by the Court.

The Court also rejected HMRC’s contentions on issue (2) and accepted that the tax repaid to the old participators was overpaid PRT. There was no excess APRT credit available because it was all validly used before 1987 to discharge the old participators' PRT liability. The carrying back of losses meant that PRT was due to be repaid and should attract interest.


In addition to the technical detail, which will only be of interest to a relatively small number of taxpayers, the case is interesting from a procedural perspective because of the way in which it was brought, and the relief sought by MCX. The claimant was not asking the Court to order HMRC to pay interest; it was asking the Court to declare that the payments in question carried interest. This form of relief is unusual in tax disputes as most tax disputes are dealt with by way of appeal to the First-tier Tribunal. It is worth bearing in mind this form of declaratory relief in cases where a statutory right of appeal may not exist.

The judgment can be viewed here.

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