St Matthews (West) Ltd & Ors, R (on the application of) v HM Treasury & Anor

Retrospective tax legislation is not unlawful or disproportionate merely because it removes an arguable tax advantage before the underlying dispute has been determined by a tribunal. A legal argument that tax relief applies is not, without an established legal basis, a possession for the purposes of Article 1 of Protocol 1. Retrospection must still satisfy legality, including clarity, foreseeability and freedom from arbitrariness, and must strike a fair balance. In tax matters Parliament enjoys a wide margin of appreciation. Tax disputes concerning liability generally fall outside the civil head of Article 6. Retrospective legislation may therefore prevent a taxpayer pursuing a tribunal claim where compelling public-interest reasons justify restoring the intended operation of tax legislation and deterring artificial avoidance schemes.

The claimants participated in the Blackfriars scheme, designed to reduce Stamp Duty Land Tax by using an agreement for the future grant of an option alongside a property sale. Sections 194(1)(a) and 194(2) of the Finance Act 2013 retrospectively amended section 45(1A) of the Finance Act 2003, with effect from 21 March 2012, to include agreements for the future grant or assignment of options.

The claimants sought judicial review and a declaration of incompatibility, alleging breach of Article 1 of Protocol 1 and Article 6 of the European Convention on Human Rights. They argued that the legislation was insufficiently foreseeable, arbitrary and disproportionate, and deprived them of the opportunity to establish the scheme’s effectiveness before the First-tier Tribunal. The central issues were whether the legislation engaged those Convention rights and, if so, whether the interference was lawful and justified.

1. Application refused. The claimants had no real prospect of successfully challenging the retrospective legislation.
2. A claim to tax relief which remained genuinely disputed and had not been established by a court or tribunal was not a possession or asset for Article 1 of Protocol 1. The legislation removed an argument that the claimants were not liable to pay Stamp Duty Land Tax; it did not itself impose a new liability.
3. Following the approach in Huitson, the court considered the Convention claims on the assumption that Article 1 of Protocol 1 was engaged. Lawfulness and proportionality were separate and cumulative requirements. The legislation had a domestic legal basis, was clear and foreseeable in light of the repeated warnings about retrospective action against artificial SDLT avoidance schemes, and was not arbitrary.
4. The Government’s protocol on unscheduled tax announcements had no legal force and did not fetter Parliament’s legislative discretion. Its criteria were qualified by the word “normally”. The relevant risk was the generic risk posed by schemes exploiting the transfer-of-rights provisions, not merely the tax attributable to this particular scheme.
5. The legislation pursued legitimate public interests: restoring the intended operation of section 45 of the Finance Act 2003, ensuring that the tax burden fell on the purchaser of the land, preserving fairness between taxpayers and deterring similar schemes. Parliament acted within its wide margin of appreciation. The interference was proportionate and struck a fair balance.
6. Article 6 was not engaged under its civil head. The court followed R (ToTel Ltd) v First Tier Tribunal (Tax Chamber) and applied the Strasbourg approach in Ferrazini v Italy and Jussila v Finland. This was not legislation depriving a party of the fruits of litigation already fought and lost. Even if Article 6 were engaged, the same considerations supplied compelling grounds in the public interest.

The application for permission to bring judicial review was refused.