Clive Sheldon QC debates the pros & cons of retrospective tax legislation
The exchequer secretary to the Treasury, David Gauke MP, hit the headlines recently when he announced that the government will legislate to close a loophole under which companies (such as Barclays Bank plc) avoid the payment of corporation tax when buying back their debt. The most controversial aspect of the legislation is that it will be retrospective, subjecting to corporation tax debt purchases that occurred on or after 1 December 2011.
The retrospective nature of the proposed legislation has come in for criticism. The Adam Smith Institute has said that ex post facto law is “unacceptable because it makes coercive rules random at the behest of the rule maker”. Such legislation breaches the principle of certainty.
Without debating the rights and wrongs of this particular taxing measure, there is no doubt that retrospective tax legislation can be lawful. Domestic courts will construe legislation as having retrospective effect where this is clear on its face, and will accept the proposition that such legislation does not necessarily contravene Art 1 of Protocol
