Ben Nevis (Holdings) Ltd & Anor v HM Revenue & Customs

A treaty provision for mutual assistance in collecting taxes applies according to the amending protocol’s own entry-into-force provisions. It is not subject to an earlier convention provision governing the temporal effect of substantive double-taxation rules unless the treaty so provides. Accordingly, assistance may be requested after the protocol enters into force in respect of pre-existing tax liabilities. Applying the machinery to enforce an existing liability is not objectionably retrospective where it does not alter the liability or the legal effect of past conduct. Section 173 of the Finance Act 2006 authorises international tax-enforcement arrangements relating to liabilities arising before that section came into force.

South African tax authorities obtained a judgment against Ben Nevis (Holdings) Limited and sought assistance from HM Revenue & Customs under the 2002 United Kingdom–South Africa Convention as amended by the 2010 Protocol. HMRC brought proceedings to enforce the tax debt and obtain relief concerning assets transferred to Metlika Trading Limited. HHJ Pelling QC dismissed the appellants’ application to set aside permission to serve out of the jurisdiction, discharge a freezing order and strike out the proceedings.

The appeal concerned only the temporal scope of the mutual-assistance provisions. The issues were whether Article 25A applied to tax liabilities arising before the 2002 Convention or the 2010 Protocol, and whether section 173 of the Finance Act 2006 authorised domestic implementation in respect of liabilities arising before 19 July 2006.

1. Appeal dismissed. The Court of Appeal upheld the judge’s dismissal of the appellants’ application.
2. The court applied the customary international-law rules reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties. A treaty is construed in good faith according to the ordinary meaning of its terms, their context, and the treaty’s object and purpose. Supplementary materials may be used where the meaning remains ambiguous or produces a manifestly absurd or unreasonable result.
3. Article VI of the 2010 Protocol made specific and workable provision for the temporal operation of the new Article 25A. Article 25A applied to requests for assistance made on or after the Protocol’s entry into force. Article 27 of the 2002 Convention, which addressed the temporal effect of provisions modifying substantive tax liabilities, did not impose an additional backstop by reference to the commencement of the 2002 Convention. The tax claims therefore fell within Article 25A, although they arose before the Protocol entered into force.
4. The application of Article 25A was not objectionably retrospective. It did not alter the South African tax liability, change the legal incidents of past transactions, or authorise action before the relevant instruments came into force. Article 25A(3) operated through a legal fiction by permitting the foreign claim to be collected as if it were a claim of the collecting State. Article 25A(6) preserved the requesting State’s exclusive jurisdiction over the existence, validity and amount of the claim.
5. The presumption against retrospectivity, and the related presumption protecting vested rights, were founded on fairness. No unfairness arose. The Revenue Rule was a rule concerning relations between sovereign States and gave taxpayers only a collateral benefit. Its abrogation by treaty did not create a legitimate expectation that the benefit would continue.
6. Section 173 of the Finance Act 2006 therefore authorised arrangements applying to tax liabilities arising before 19 July 2006. Jackson LJ additionally stated that memoranda of understanding concerning mutual assistance should be publicly available and that appellate skeleton arguments must comply with the relevant practice directions, with costs sanctions available for non-compliance.

• Court of Appeal (Civil Division) — On 23 May 2013, dismissed the appeal and upheld the dismissal of the appellants’ application.
• High Court, Chancery Division — On 20 July 2012, HHJ Pelling QC dismissed the application to set aside permission to serve out of the jurisdiction, discharge the freezing order and strike out the proceedings.