The High Court held that an agreement between two countries to provide mutual assistance in collecting taxes applied to all tax debts outstanding at the date on which the agreement took effect (HMRC and another v Ben Nevis Holdings (Limited) and others [2012] EWHC 1807 (Ch) (HH Judge Pelling QC)).
The High Court rejected a British Virgin Islands company's appeal against HMRC's claim to recover taxes due to the South African tax authority and against an order freezing one of the appellant's bank accounts. HMRC had pursued the tax debt and requested the freezing order in accordance with provisions for assistance in collecting taxes that were introduced into the 2002 double tax treaty (DTT) between the UK and South Africa, as Article 25A, by a protocol signed in 2010.
The High Court dismissed the appellant's argument that, as the tax debt related to the years 1998 to 2000 and Article 28 of the DTT precluded retroactive effect, action under the new Article 25A of the DTT was not possible. The High Court held that once the 2010 protocol entered into force, Article 25A applied to all tax debts (regardless of when they arose) subject only to the qualifications in Article 25A itself and to the request for assistance being made on or after the 2010 protocol's entry into force. The High Court considered this finding to be in accordance with the commentary to the corresponding article of the OECD Model Tax Convention on which Article 25A of the DTT is based.
The High Court also dismissed the appellant's argument that pursuit of the debt outside the jurisdiction in which it arose (and under an agreement that was not in force when the debt was incurred) was a breach of its human rights. The High Court found that, as the South African law under which the tax was assessed had not changed retrospectively, the debt could be validly collected under the mutual assistance provisions introduced into the DTT.
Case: HMRC and another v Ben Nevis (Holdings) Ltd and others [2012] EWHC 1807 (Ch) (www.practicallaw.com/8-520-5728) (HH Judge Pelling QC).
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