Revenue and Customs v Burlington Loan Management DAC , [2026] EWCA Civ 461

BLM was an Irish-resident investment company which had already acquired a substantial number of proved claims in the administration of Lehman Brothers International (Europe) ("LBIE" – a UK resident). In February 2018, it purchased the claim to post-administration interest (the “SAAD Claim”) of an unrelated Caymans company in liquidation (“SICL”) for a cash amount which exceeded what it expected to receive from LBIE after taking into account UK withholding tax of 20%. However, after taking into account a refund of such withholding tax pursuant to Art. 12(1) of the UK-Ireland Treaty, it expected to generate an 8% profit.

Art. 12(1) provided:

Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

There would have been no refund of the UK withholding tax had the SAAD Claim continued to be held by SICL.

HMRC denied BLM’s refund claim on the basis of Art. 12(5) of that Treaty, which excluded the application of Art. 12 “if it was the main purpose or one of the main purposes of any person concerned with the … assignment … to take advantage of … Article [12].

Before agreeing with the concession of HMRC that SICL did not have any purpose of taking advantage of Art. 12(1) when it agreed to sell the SAAD Claim, so that Art. 12(5) was not engaged, Snowden LJ noted that although SICL would have appreciated that the price BLM was prepared to offer reflected the UK withholding tax exemption, SICL did not know the reason for that, which could have been attributable to BLM having UK tax losses or being exempt from UK withholding tax for some reason unrelated to the treaty.

Turning to the purpose of BLM, he found that although BLM was relying on Art. 12(1), the Art. 12(5) exclusion nonetheless was not engaged. He stated (at paras. 95, 102):

[T]o "take advantage" of a provision such as Article 12(1), within the meaning of an anti-abuse provision such as Article 12(5), cannot simply be synonymous with to "obtain the benefit" of that provision. That would have the result that the treaty would be self-defeating. …"[T]o take advantage of" the article in question must mean obtaining the benefit of the article in a way that is contrary to the object and purpose of the treaty. …

[G]enerally, one of the principal objectives of the UK-Ireland Treaty was to promote the movement of capital between the UK and Ireland by the elimination of double taxation. In the current context, the movement of capital in question was the payment of interest on the SAAD Claim from a source in the UK. …[E]nabling BLM, as a resident of Ireland, to bid a higher price to acquire the SAAD Claim on the assumption that it would only be taxed on those monies in Ireland and not also in the UK was precisely in line with the objects and purposes of the UK-Ireland Treaty.

Snowden LJ went on to indicate that “Article 12(5) would plainly have been engaged” (para. 116) if, instead, SICL had, for instance, incorporated a wholly-owned Irish subsidiary and had contributed the SAAD Claim to it so as to allow the subsidiary to claim the Art. 12(1) exemption.

BLM, a substantial Irish-resident investment company, purchased a proved claim to post-administration interest in the administration of Lehman Brothers International (Europe) ("LBIE" – a UK resident) from an unrelated Caymans company (“SICL”) for a cash purchase price which exceeded what SICL would have received in light of UK withholding tax of 20% - but generated an 8% profit to itself because of the withholding tax exemption under the UK-Ireland treaty. Art. 12(1) provided:

Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

HMRC denied BLM’s refund claim on the basis of Art. 12(5) of that Treaty, which excluded the application of the interest exemption in Art. 12 “if it was the main purpose or one of the main purposes of any person concerned with the … assignment … to take advantage of … Article [12].

Snowden LJ found that although BLM was relying on Art. 12(1), the Art. 12(5) exclusion nonetheless was not engaged. He stated (at paras. 95, 102):

[T]o "take advantage" of a provision such as Article 12(1), within the meaning of an anti-abuse provision such as Article 12(5), cannot simply be synonymous with to "obtain the benefit" of that provision. That would have the result that the treaty would be self-defeating. …"[T]o take advantage of" the article in question must mean obtaining the benefit of the article in a way that is contrary to the object and purpose of the treaty. …

[G]enerally, one of the principal objectives of the UK-Ireland Treaty was to promote the movement of capital between the UK and Ireland by the elimination of double taxation. In the current context, the movement of capital in question was the payment of interest on the SAAD Claim from a source in the UK. … [E]nabling BLM, as a resident of Ireland, to bid a higher price to acquire the SAAD Claim on the assumption that it would only be taxed on those monies in Ireland and not also in the UK was precisely in line with the objects and purposes of the UK-Ireland Treaty.

Snowden LJ went on to indicate that “Article 12(5) would plainly have been engaged” (para. 116) if, instead, SICL had, for instance, incorporated a wholly-owned Irish subsidiary and had contributed the SAAD Claim to it so as to allow the subsidiary to claim the Art. 12(1) exemption.

After noting (pat para. 61) the agreement of the parties that Art. 3(2) of the UK-Ireland treaty “meant that the Court should have regard to English domestic law cases on the meaning of ‘main purpose or one of the main purposes’" in Art. 12(5) of that treaty, Snowden LJ stated (in footnote 2):

I am far from convinced that the expression “main purpose or one of the main purposes” in Article 12(5) is a “term” of the UK-Ireland Treaty to which Article 3(2) could apply; or that the contracting states should be taken to have intended that this Court should simply apply domestic English law authorities on the meaning of that phrase without also taking into account the wider principles of interpretation of international treaties outlined in Royal Bank of Canada v HMRC.

In agreeing with this statement, Falk LJ stated (at para. 135):

Provisions in the form of Article 12(5) are clearly not limited to treaties to which the UK is a party. That might be taken to indicate an expectation that a consistent interpretation should be adopted internationally.