The Constitutional Court (CC), in United Manganese of Kalahari (Pty) Limited v CSARS and Others (UMK) has fundamentally reshaped the jurisdictional framework for High Court tax litigation in South Africa.
The judgment replaced the current restrictive “exceptional circumstances” test in section 105 of the Tax Administration Act (TAA) with a more flexible “good cause” standard, creating new strategic opportunities for litigants. Three subsequent decisions provide valuable guidance on the application of the new standard.
Core principles established by the UMK judgment
The unanimous UMK judgment established a new, pragmatic standard for applying section 105 of the TAA. Section 105 requires tax disputes to be heard by the Tax Court, unless a High Court otherwise directs.
The CC’s most significant finding in UMK was its unequivocal rejection of the “exceptional circumstances” test, noting the legislature’s deliberate omission of the phrase from section 105. In its place, the CC instituted the more flexible “good cause” test. The central inquiry would be whether a sound justification exists for the High Court to exercise its jurisdiction.
The judgment clarifies that the High Court’s jurisdiction is “conditionally suspended”, with applicants required to motivate for a section 105 direction to lift the suspension at the threshold of proceedings – that is, in the notice of motion and founding affidavit of the application to the High Court for relief.
Crucially, the CC also emphasised the “curative” effect of the Tax Court’s de novo appeal process, meaning the Tax Court can completely rehear matters and cure any procedural defects from the assessment process. The CC further expressed a strong aversion to “piecemeal adjudication”, both of which serve as powerful factors against granting a High Court direction for standard assessment disputes.
However, the Tax Court does not have jurisdiction to entertain Promotion of Administrative Justice Act (PAJA) and legality reviews or grant declaratory orders, and a High Court may, properly motivated, be the appropriate forum for such disputes.
Henque: a dispute of statutory interpretation
In the Supreme Court of Appeal (SCA) decision of Henque 3935 CC t/a PQ Clothing Outlet v CSARS, the South African Revenue Service argued for the first time on appeal to the SCA that the High Court lacked jurisdiction to hear the dispute under section 105.
Henque commenced business rescue proceedings on 31 January 2018 (BR commencement date). SARS issued an additional assessment on income tax on Henque on 1 May 2018 for the 2017 year of assessment. The income tax debt was for a year of assessment before the BR commencement date, but the additional assessment giving rise to the tax debt was issued after the BR commencement date.
The key issues were:
- whether the income tax debt from the 2017 additional assessment issued after 31 January 2018 constituted a pre-commencement or post-commencement debt; and
- whether this tax debt could be set off against post-commencement VAT refunds.
In May this year, the SCA held that Henque was not seeking a declaratory order on the correctness of an assessment or seeking to set the additional assessment aside. Instead, Henque was challenging the legal classification of the tax debt (whether it was a pre- or post-business rescue debt) and the legality of SARS’s action to set it off against VAT refunds that arose after BR commencement date. Accordingly, applying the UMK decision, the SCA held that the High Court did have jurisdiction to consider the application for declaratory relief.
This case illustrates that when a tax dispute fundamentally concerns broader legal principles that intersect tax law and non-tax law – as opposed to challenging an assessment itself – there is good cause for the High Court to hear the matter.
In Henque, the Court was required to reconcile competing policy objectives in the business rescue provisions under the Companies Act and SARS’s tax collection powers during business rescue.
Kerbyn: an issue of procedure
Kerbyn Cape 2 (Pty) Ltd v CSARS (July 2025) was a PAJA review application to challenge SARS’s refusal to condone the late filing of VAT and income tax assessments.
In opposition, SARS raised two in limine points:
- Tax matters were exclusively reserved for the Tax Court.
- The applicant had not exhausted the available internal remedies.
Further, the applicant had not properly pleaded for the jurisdiction of the High Court in its founding affidavit and notice of motion. The applicant did not provide reasons for the delay, length, prospects of success of the merits, and prejudice to respondent if condonation was granted, and any other relevant factor. As a result, the High Court held in favour of SARS.
This decision reinforces three essential procedural points when seeking High Court relief:
- Assessment disputes belong in the Tax Court under Chapter 9 of the TAA.
- Internal remedies must be exhausted before proceeding to High Court review.
- Founding affidavits seeking to review SARS’s decisions must explicitly articulate the grounds for High Court jurisdiction in tax disputes.
Prinsloo: when the litigant is not the taxpayer
In the most recent of the trio of cases, Prinsloo and Others v CSARS and Another (August 2025), the applicants were liquidators of a Ponzi scheme using a web of interconnected companies.
Before the Prinsloo application, the applicants had successfully obtained a High Court order to consolidate the liquidation process of the three companies and to treat the available funds as owing and due to the creditors of all the companies (Baqwa order). SARS was not cited as a party in the application leading to the Baqwa order.
The liquidators in the Prinsloo application sought a declaratory order against SARS that the effect of the Baqwa order was to deem the relevant companies not to be juristic persons under the Companies Act and TAA, and further extinguished SARS’s ability to assess the individual companies for tax.
SARS raised a point in limine that the liquidators had not sought a 105 direction in the founding affidavit and notice of motion.
The High Court in Pretoria held that section 105 did not apply because the party bringing the application was not the taxpayer that had been assessed. The Court concluded that because a non-taxpayer was seeking a declarator on the interpretation of a court order, the matter was moved “out of the ambit of section 105 of the TAA”. The dispute was fundamentally about company law and corporate personality, not tax law.
Further, the point of law was one of general importance, such that a judgment with precedential value will have public utility. Therefore, section 105 does not provide a barrier for the matter to be heard by the High Court.
Conclusion
The three cases collectively build a coherent picture of the post-UMK landscape of seeking High Court relief in tax disputes.
If the matter concerns the merits of an assessment, as in Kerbyn, the Tax Court is the proper forum. However, if it involves broad statutory interpretation (Henque), a pure point of law of public importance or is brought by a non-taxpayer (Prinsloo), the High Court may have jurisdiction.
Success in obtaining a section 105 direction now requires precise legal analysis demonstrating why the High Court’s conditionally suspended jurisdiction should be restored to deliver effective relief that the Tax Court cannot provide.
Joon Chong and Dario Milo are partners at Webber Wentzel.
Disclaimer: The views expressed in this article are those of the writers and are not necessarily shared by Moonstone Information Refinery or its sister companies. The information in this article is a general guide and should not be used as a substitute for obtaining professional tax advice.
