swarb.co.uk - law index
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Taxes Management - From: 1990 To: 1990
This page lists 4 cases, and was prepared on 02 April 2018.
ÂInland Revenue Commissioners v Commerzbank [1990] STC 285
1990
ChD
Mummery J
Taxes Management
Mummery J set out the correct approach to interpretation of double taxation agreements as laid down in Fothergill. He said "(1) It is necessary to look first for a clear meaning of the words used in the relevant article of the convention, bearing in mind that 'consideration of the purpose of an enactment is always a legitimate part of the process of interpretation': per Lord Wilberforce and Lord Scarman. A strictly literal approach to interpretation is not appropriate in construing legislation which gives effect to or incorporates an international treaty: per Lord Fraser and Lord Scarman. A literal interpretation may be obviously inconsistent with the purposes of the particular article or of the treaty as a whole. If the provisions of a particular article are ambiguous, it may be possible to resolve that ambiguity by giving a purposive construction to the convention looking at it as a whole by reference to its language as set out in the relevant United Kingdom legislative instrument: per Lord Diplock.
(2) The process of interpretation should take account of the fact that – "The language of an international convention has not been chosen by an English parliamentary draftsman. It is neither couched in the conventional English legislative idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament which deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it in James Buchanan &Co Ltd v Babco Forwarding & Shipping (UK) Limited, [1987] AC 141 at 152, "unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation": per Lord Diplock and Lord Scarman.
(3) Among those principles is the general principle of international law, now embodied in art 31(1) of the Vienna Convention on the Law of Treaties, that 'a treaty should be interpreted in good faith and in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose'. A similar principle is expressed in slightly different terms in McNair's The Law of Treaties (1961) p 365, where it is stated that the task of applying or construing or interpreting a treaty is 'the duty of giving effect to the expressed intention of the parties, that is, their intention as expressed in the words used by them in the light of the surrounding circumstances'. It is also stated in that work that references to the primary necessity of giving effect to the 'plain terms' of a treaty or construing words according to their 'general and ordinary meaning' or their 'natural signification' are to be a starting point or prima facie guide and 'cannot be allowed to obstruct the essential quest in the application of treaties, namely the search for the real intention of the contracting parties in using the language employed by them'.
(4) If the adoption of this approach to the article leaves the meaning of the relevant provision unclear or ambiguous or leads to a result which is manifestly absurd or unreasonable recourse may be had to 'supplementary means of interpretation' including travaux préparatoires: per Lord Diplock referring to art 32 of the Vienna Convention, which came into force after the conclusion of this double taxation convention, but codified an already existing principle of public international law. See also Lord Fraser and Lord Scarman.
(5) Subsequent commentaries on a convention or treaty have persuasive value only, depending on the cogency of their reasoning. Similarly, decisions of foreign courts on the interpretation of a convention or treaty text depend for their authority on the reputation and status of the court in question: per Lord Diplock and per Lord Scarman.
(6) Aids to the interpretation of a treaty such as travaux préparatoires, international case law and the writings of jurists are not a substitute for study of the terms of the convention. Their use is discretionary, not mandatory, depending, for example, on the relevance of such material and the weight to be attached to it: per Lord Scarman."
1 Cites
1 Citers
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Inland Revenue Commissioners v Nuttall [1990] STC 194
1990
CA
Parker LJ, Ralph Gibson LJ, Bingham LJ
Taxes Management
The Revenue and the taxpayer had agreed that the latter should pay £15,000 in consideration of the Revenue taking no proceedings against him for tax penalties or interest. The taxpayer paid only £5,000 and the Revenue sought summary judgment for the rest. The taxpayer, who claimed that the agreement made was ultra vires the Revenue, was granted leave to defend by the Master, a decision upheld by French J. The Revenue appealed to the Court of Appeal. The appeal succeeded, and summary judgment was given for the sum which the Revenue had claimed.
After citing IRC v NFSESB, Parker LJ said: "If it is right that the Board had power to enter into a bargain involving the 'amnesty' with regard to past tax, it appears to me to follow that they must also have power, had they wanted to, to make a bargain whereby some sum would have been paid in respect of that past tax." and
"Although, as we have noted, the Taxes Acts offence code provides for the imposition of penalties exclusively as a judicial act whether by the Appeal Commissioners or the court, in practice most of the money collected in respect of penalties and default interest is paid without being imposed or charged formally. The record shows that over the past seven calendar years formal awards of penalties in respect of major offences have averaged just seven cases a year. What happens in practice is that taxpayers who have, in the opinion of the Board's officers, rendered themselves liable to the imposition of interest and penalties are invited to make a settlement. The procedure is that the taxpayer makes a voluntary offer to pay a sum of money in consideration of the Board agreeing not to take formal proceedings for any tax underpaid and the interest and penalties. If such an offer is made and is accepted, a contract binding upon both the Inland Revenue and the taxpayer is brought into being."
As to Cockerline, he said: "But it appears to me that if the Revenue are to have the necessary powers, as they are under s 1 of the 1890 Act, it is an incidental power to enable them to enter into an agreement to compromise an overall situation consisting partly in outstanding tax, partly in a potential liability to culpable interest and partly in potential liability to pay penalties if by that means they consider they can best recover and manage the tax which is committed to their care.
I would accordingly and for those reasons allow this appeal."
Ralph Gibson LJ said of the taxpayer's argument: "It was, I think, more than 60 years too late. It is not open to this court, having regard to the long established practice of the Revenue, and to the legislative history, to say now that the commissioners do not have the lawful power which they exercised by making this agreement with the taxpayer."
Bingham LJ said: "It would seem to me extraordinary, and also regrettable, if the Revenue could not achieve by agreement that which it could undoubtedly achieve by coercion. The submission that it could not, as counsel for the taxpayer acknowledges, runs counter to the habitual practice of the Revenue recognised by the recent Royal Commission without query or criticism. But counsel fairly points to the fact that although the legislation expressly authorises the Revenue to mitigate and compound claims for penalties and default interest, it does not expressly authorise the Revenue to compromise claims for back duty save where an assessment has been made and appealed against.
I would prefer, if necessary, to accept this legislative omission as an anomaly of drafting than be compelled to a result I regard as offensive to good sense and subversive of the beneficial present practice. But there is, I think, no anomaly. The power to make agreements with taxpayers for the payment of back duty, even in the absence of assessment and appeal, is in my view a power necessary for carrying into execution the legislation relating to Revenue within the meaning of s 1 of the 1890 Act. It is, of course, a power to be exercised with circumspection and due regard to the Revenue's statutory duty to collect the public revenue. But if in an appropriate case the Revenue reasonably considers that the public interest in collecting taxes will be better served by informal compromise with the taxpayer than by exercising the full rigour of its coercive powers, such compromise seems to me to fall well within the wide managerial discretion of the body to whose care and management the collection of tax is committed. Such informal compromise deprives the taxpayer of the locus poenitentiae provided by s 54(2), and the right to re-open assessments under s 33, but it protects him against exercise of the Revenue's more draconian enforcement powers (eg under ss 61 and 65) and often, as here, against further liability for penalties and default interest. I have no hesitation in holding such an agreement, properly made, to be binding. There is accordingly, in my opinion, no arguable defence to the present claim.
I would reach this conclusion even if the matter were entirely free from decided authority. But it seems to me that Rowlatt J in A-G v Johnstone (1926) 10 TC 758 did sanction enforcement of an agreement which related to arrears of tax as well as penalties. In W H Cockerline & Co v IRC (1930) 16 TC 1 the Court of Appeal was not concerned with enforcement of a back duty agreement but did, as I read the judgments, uphold the validity of an agreement made in the absence of an assessment and acknowledge that a taxpayer could validly waive the requirements of at least some procedural provisions enacted for his protection. The Fleet Street Casuals' case (see IRC v National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260, [1982] AC 617) shows the breadth of the Revenue's discretionary powers. I think these cases provide judicial sanction for a practice which Rowlatt J over 60 years ago described as long pursued, and which s 105 of the 1970 Act implicitly acknowledges."
1 Cites
1 Citers
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 Bi-Flex Caribbean Ltd v Board of Inland Revenue; PC 1990 - (1990) 63 TC 515
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Regina v Commissioners of Inland Revenue, Ex parte Taylor (No 2) (1990) 62 TC 578
1990
Legal Professions, Taxes Management
1 Citers
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