Court of Appeal relies on conforming interpretation to read in a scheme for paying tax in five equal stages

12/06/26

The Court of Appeal handed down judgment today (Asplin LJ, Laing LJ, Miles LJ) in an appeal from the Upper Tribunal (Tax Chamber) concerning the limits of the power of conforming interpretation in EU law: The Trustees of the Panico Panayi Accumulation and Maintenance Settlements Nos. 1 to 4 and another v HMRC [2026] EWCA Civ 744.

The Appellants – the trustees of a family trust – left the United Kingdom in 2005. On departure, they were obliged to pay capital gains tax on the assets in the trust. The law at the time made no provision for deferred payment of the sums owing.

Following a reference to the CJEU, it was established that the obligation to pay tax immediately on departure was a disproportionate interference with the trustees’ freedom of establishment.

Having lost in Luxembourg, HMRC then argued that an option to choose to pay in five equal stages could be read into the relevant legislation by way of conforming interpretation. This reflected – but was not identical to – the legislative amendments made by the Government after the reference to Luxembourg in order to make UK law compliant with EU law.

The Court found in favour of HMRC, rejecting the appeal, and held that such a scheme can be read into the legislation by way of the ‘muscular’ duty of conforming interpretation. It rejected the Appellants’ submission that the obligation to pay tax should be disapplied.

The Judgment is notable because it disagrees with the obiter conclusions of a different Court of Appeal in Revenue and Customs Commissioners v Ampleaward Ltd [2021] EWCA Civ 1459; [2021] STC 2260. In that case, the Court had regard to the fact that the conforming interpretation argued for by HMRC was materially similar to that eventually legislated for by Parliament. In Ampleaward the Court of Appeal found that this mitigated against finding a conforming interpretation: if Parliament had decided that its amendment would not have retrospective effect, the Court should not then produce that result by way of interpretation.

The judgment also casts doubt on – but does not decide either way – the proposition that conforming interpretation in EU law should be conducted by reference to the same principles that apply under Human Rights Act 1998.  The Court suggested – but did not proceed on the basis that – the obligation under the European Communities Act 1971 “may be stronger” than that imposed by the Human Rights Act 1998.

The Judgment can be found here.