Gallaher v HMRC: the last UK reference to the CJEU?

22 December 2020

Gallaher v HMRC: the last UK reference to the CJEU?

In the recent Upper Tribunal Tax and Chancery decision of Gallaher v HMRC, it was decided that a request should be made to the CJEU for a preliminary ruling on whether the UK’s failure to extend the “no gain no loss” rules under s171 TCGA 1992 [and s775 and s776 CTA 2009] to intra-group transfers by UK companies to companies resident in other EU Member States or in third countries was contrary to the freedom of establishment and free movement of capital.

The request for interpretation will be made during the UK’s transition period as it withdraws from the EU. During the transition period the majority of EU rules continue to apply to the UK and the jurisdiction of the CJEU continues just as it did when the UK was a Member State. Therefore, where the UK courts have questions about the interpretation of EU law they can seek an answer from the CJEU. A UK court or tribunal has until 11pm on 31 December 2020 to make a request and so this must surely be one of the last references that a UK court will make to the CJEU.

While the significance of the points being referred to the CJEU is more limited in light of the UK’s sticking plaster introduced by s34 and Schedule 7 of FA 2020 and more fundamentally, the UK’s withdrawal from the EU, this last request is important. It places a mark in the sand as the last time the UK courts can refer to the CJEU for interpretation. At the end of the transition period UK courts will have to muddle through on their own as the interpretation of EU retained law will fall in the hands of UK courts and tribunals. Just as the UK was a member of the EU for 47 years, it can be anticipated that the interpretation of retained EU law will occupy our minds for just as long.

These are material issues of EU law, which are critical to our decision. Whilst we would ordinarily be quite prepared to reach a decision on them, we cannot resolve the issues “with complete confidence” as required by the test set out by Sir Thomas Bingham MR in R v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd ex parte Else (1982) Ltd and another [1993] QB 534 and referred to by Rose J in her decision in the Coal Staff case.