UT (Tax & Chancery) UT/000086, 87, 89/2022 - [2024] UKUT 00058 (TCC)

We should say at the outset that we accept a submission of Mr Rivett that the test for POEM applies generally and cannot be construed in a different way simply because the context here involves a tax avoidance scheme. Mr Stone did not suggest otherwise.

Mr Rivett submitted that the test derived from Wood v Holden was consistent with an orthodox approach to the construction of treaties generally and could be supported as a matter of principle. There were three strands to Mr Rivett’s arguments:

Mr Rivett made submissions as to the test to identify the POEM by reference to each of these arguments. He submitted that as a matter of authority we were bound by Wood v Holden which was itself endorsed by the Court of Appeal in Smallwood. In relation to construing the Treaty, he made submissions based on the generally accepted approach to construing treaties and reliance on OECD Commentaries, both at the time the Treaty was negotiated and subsequent Commentaries. Some of the Commentaries were referred to by the SpC and the Court of Appeal in Smallwood. Indeed, the reliance placed on the Commentaries by Patten LJ was subsequently endorsed by Lord Briggs JSC in Fowler v HM Revenue & Customs [2020] UKSC 22 at [18]. Mr Rivett also submitted that as a matter of principle there were a number of juridical and practical concerns if HMRC are right about the interpretation of POEM. With an element of hyperbole, he described the prospect of trusts being resident in the UK based on the facts of this case as “terrifying”.

We set out below our findings on the position as a matter of authority. In the light of those findings it is not necessary for us to embark on our own analysis as to the true construction of the Treaty or to consider the position as a matter of principle.