Skatteforvaltningen v. Solo Capital – Court of Appeal of England and Wales finds that the revenue rule does not apply to fictitious tax refund claims made by a non-taxpayer

The Danish Customs and Tax Divisions (“SKAT”) brought claims in an English civil court seeking to recover £1.44 billion which it had paid based on allegedly fraudulent claims for refunds of Danish dividend withholding tax – SKAT alleged that most of the defendants had fraudulently misrepresented that they, as shareholders of Danish companies, had been subject to withholding at a rate in excess of the Treaty-reduced rate on dividends when, in fact, they never had held any shares in any of the relevant Danish companies. Sir Julian Flaux, Chancellor rejected the defendant’s submission that SKAT’s claim was precluded by the revenue rule, which he expressed as follows:

English courts have no jurisdiction to entertain an action … for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State.

He stated:

[T]he fraud here was not fraud by the taxpayer in evading tax. There was no tax due and those who committed the fraud were never taxpayers. …

[W]hat SKAT is saying entitles it to repayment is not that the … alleged fraud defendants owe it tax or have cheated it out of tax, but that it was induced by fraudulent misrepresentation to pay away monies to these persons to which they were not entitled on any basis.

Neal Armstrong. Summary of Skatteforvaltningen v Solo Capital Partners LLP, [2022] EWCA Civ 234 under Statutory Interpretation – Revenue Rule.