W. T. RAMSAY LIMITED (APPELLANTS)
v.
COMMISSIONERS OF INLAND REVENUE (RESPONDENTS)
EILBECK (INSPECTOR OF TAXES) (RESPONDENT)
v.
RAWLING (APPELLANT)
Lord Wilberforce
Lord Fraser of Tullybelton
Lord Russell of Killowen
Lord Roskill
Lord Bridge of Harwich
Lord Wilberforce
The first of these appeals is an appeal by W. T. Ramsay Ltd,
a farming company. In its accounting period ending 31 May 1973 it made
a ” chargeable gain ” for purposes of corporation tax by a sale-leaseback
transaction. This gain it desired to counteract, so as to avoid the tax, by
establishing an allowable loss. The method chosen was to purchase from
a company specialising in such matters a ready-made scheme. The general
nature of this was to create out of a neutral situation two assets one of
which would decrease in value for the benefit of the other. The decreasing
asset would be sold, so as to create the desired loss; the increasing asset would
be sold, yielding a gain which it was hoped would be exempt from tax.
In the courts below, attention was concentrated upon the question whether
the gain just referred to was in truth exempt from tax or not. The Court
of Appeal, reversing the decision of Goulding J., decided that it was not.
In this House, the Crown, while supporting this decision of the Court of
Appeal, mounted a fundamental attack upon the whole of the scheme
acquired and used by the appellant. It contended that it should simply be
disregarded as artificial and fiscally ineffective.
Immediately after this appeal there was heard another taxpayer’s
appeal—Eilbeck v. Rawling. This involved a scheme of a different character
altogether, but one also designed to create a loss allowable for purposes of
capital gains tax, together with a non-taxable gain, by a scheme acquired
for this purpose. Similarly, this case was decided, against the taxpayer, in
the Court of Appeal upon consideration of a particular aspect of the scheme:
and similarly, the Crown in this House advanced a fundamental argument
against the scheme as a whole.
I propose to consider first the fundamental issue, which raises arguments
common to both cases. This is obviously of great importance both in
principle and in scope. I shall then consider the particular, and quite
separate arguments, relevant to each of the two appeals.
I will first state the general features of the schemes which are relevant
lo the wider argument.
In each case we have a taxpayer who has realised an ascertained and
quantified gain: in Ramsay £187,977, in Rawling £355,094. He is then
advised to consult specialists willing to provide, for a fee, a preconceived
and ready made plan designed to produce an equivalent allowable loss.
The taxpayer merely has to state the figure involved i.e. (he amount of
the gain he desires to counteract, and the necessary particulars are inserted
into the scheme.
The scheme consists, as do others which have come to the notice of the
courts, of a number of steps to be carried out, documents to be executed,
payments to be made, according to a timetable, in each case rapid (see the
attractive description by Buckley L.J. in Rawling). In each case two
assets appear, like particles in a gas chamber with opposite charges, one
of which is used to create the loss, the other of which gives rise to an
equivalent gain which prevents the taxpayer from supporting any real loss,
and which gain is intended not to be taxable. Like the particles, these
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assets have a very short life. Having served their purpose they cancel
each other out and disappear. At the end of the series of operations, the
taxpayer’s financial position is precisely as it was at the beginning, except
that he has paid a fee, and certain expenses, to the promoter of the scheme.
There are other significant features which are normally found in schemes
of this character. First, it is the clear and stated intention that once
started each scheme shall proceed through the various steps to the end—they
are not intended to be arrested half-way (cf. Chinn v. Hochstrasser [1981]
W.L.R. 14). This intention may be expressed either as a firm contractual
obligation (it was so in Rawling) or as in Ramsay as an expectation without
contractual force.
Secondly, although sums of money, sometimes considerable, are supposed
to be involved in individual transactions, the taxpayer does not have to put
his hand in his pocket (cf. I.R.C. v. Plummet; [1980] AC 896. Chinn
(supra.)). The money is provided by means of a loan from a finance house
which is firmly secured by a charge on any asset the taxpayer may appear
to have, and which is automatically repaid at the end of the operation. In
some cases one may doubt whether, in any real sense, any money existed
at all. It seems very doubtful whether any real money was involved in
Rawling: but facts as to this matter are for the commissioners to find. I
will assume that in some sense money did pass as expressed in respect of
each transaction in each of the instant cases. Finally, in each of the present
cases it is candidly, if inevitably, admitted that the whole and only purpose
of each scheme was the avoidance of tax.
In these circumstances, your Lordships are invited to take, with regard to
schemes of the character I have described, what may appear to be a new
approach. We are asked, in fact, to treat them as fiscally, a nullity, not
producing either a gain or a loss. Mr. Potter, Q.C. described this as
revolutionary, so I think it opportune to restate some familiar principles
and some of the leading decisions so as to show the position we are now in.
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A subject is only to be taxed upon clear words, not upon
” intendment” or upon the ” equity” of an Act. Any taxing Act of
Parliament is to be construed in accordance with this principle. What are
“clear words” is to be ascertained upon normal principles: these do
not confine the courts to literal interpretation. There may, indeed should,
be considered the context and scheme of the relevant Act as a whole, and its
purpose may, indeed should, be regarded, (see—I.R.C. v. Wesleyan and
General Assurance Society (1948) 30 T.C.11,16 per Lord Greene: Mangin
v. I.R.C. [1971] AC 739,746 per Lord Donovan. The relevant Act in
these cases is the Finance Act 1965. the purpose of which is to impose
a tax on gains less allowable losses, arising from disposals. -
A subject is entitled to arrange his affairs so as to reduce his liability
to tax. The fact that the motive for a transaction may be to avoid tax does
not invalidate it unless a particular enactment so provides. It must be
considered according to its legal effect. -
It is for the fact-finding commissioners to find whether a document,
or a transaction, is genuine or a sham. In this context to say that a
document or transaction is a ” sham ” means that while professing to be
one thing, it is in fact something different. To say that a document or
transaction is genuine, means that, in law, it is what it professes to be, and
it does not mean anything more than that. I shall return to this point.
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Each of these three principles would be fully respected by the decision
we are invited to make Something more must be said as to the next principle.
4. Given that a document or transaction is genuine, the court cannot go
behind it to some supposed underlying substance. This is the well known
principle of I.R.C. v. Duke of Westminster [1936] AC 1. This is a cardinal
principle but it must not be overstated or overextended. While obliging the
court to accept documents or transactions, found to be genuine, as such,
it does not compel the court to look at a document or a transaction in
blinkers, isolated from any context to which it properly belongs. If it
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can be seen that a document or transaction was intended to have effect as
part of a nexus or series of transactions, or as an ingredient of a wider
transaction intended as a whole, there is nothing in the doctrine to prevent
it being so regarded: to do so is not to prefer form to substance, or substance
to form. It is the task of the court to ascertain the legal nature of any
transaction to which it is sought to attach a tax or a tax consequence and if
that emerges from a series or combination of transactions, intended to
operate as such, it is that series or combination which may be regarded. For
this there is authority in the law relating to income tax and capital gains
tax—see Chinn v. Hochstrasser [1981] 2 WLR 14, I.R.C. v. Plummer
[1980] AC 896.
For the commissioners considering a particular case it is wrong, and an
unnecessary self limitation, to regard themselves as precluded by their own
finding that documents or transactions are not ” shams “, from considering
what, as evidenced by the documents themselves or by the manifested
intentions of the parties, the relevant transaction is. They are not, under the
Westminster doctrine or any other authority, bound to consider individually
each separate step in a composite transaction intended to be carried through
as a whole. This is particularly the case where (as in Rawling) it is proved
that there was an accepted obligation once a scheme is set in motion, to
carry it through its successive steps. It may be so where (as in Ramsay or in
Black Nominees Ltd v. Nicol (1975) 50T.C.229) there is an expectation that
it will be so carried through, and no likelihood in practice that it will
not. In such cases (which may vary in emphasis) the commissioners should
find the facts and then decide as a matter (reviewable) of law whether what
is in issue is a composite transaction, or a number of independent
transactions.
I will now refer to some recent cases which show the limitations of the
Westminster doctrine and illustrate the present situation in the law.
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Floor v. Davis [1978] Ch. 295 (1979) 2 W.L.R. 830 (H.L.). The
key transaction in this scheme was a sale of shares in a company called
IDM to one company (FNW) and a resale by that company to a further
company (KDI). The majority of the Court of Appeal thought it right
to look at each of the sales separately and rejected an argument by the
Crown that they could be considered as an integrated transaction. But
Eveleigh L.J. upheld that argument. He held that the fact that each sale
was genuine did not prevent him from regarding each as part of a whole,
or oblige him to consider each step in isolation. Nor was he so prevented
by the Westminster case. Looking at the scheme as a whole, and finding
that the taxpayer and his sons-in-law had complete control of the IDM
shares until they reached KDI, he was entitled to find that there was a
disposal to KDI. When the case reached this House it was decided on
a limited argument, and the wider point was not considered. This same
approach has commended itself to Templeman L.J. and has been expressed
by him in impressive reasoning in the Court of Appeal’s judgment in
Rawling. It will be seen from what follows that these judgments, and
their emerging principle, commend themselves to me. -
I.R.C. v. Plummer [1980] AC 896. This was a prearranged scheme,
claimed by the Revenue to be ” circular “—in the sense that its aim and
effect was to pass a capital sum round through various hands back to its
starting point. There was a finding by the Special Commissioners that the
transaction was a bona fide commercial transaction, but in this House their
Lordships agreed that it was legitimate to have regard to all the arrangements
as a whole. The majority upheld the taxpayer’s case on the ground that
there was commercial reality in them: as I described them they amounted
to ” a covenant, for a capital sum, to make annual payments, coupled with
” security arrangements for the payments ” and I attempted to analyse the
nature of the bargain with its advantages and risks to either side.
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The case is no authority that the court may not in other cases and with
different findings of fact reach a conclusion that, viewed as a whole, a
composite transaction may produce an effect which brings it within a fiscal
provision.
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3. Chinn v. Hochstrasser [1981] 2 WLR 14. This again was a
prearranged scheme, described by the special commissioners as a single
scheme. There was no express finding that the parties concerned were
obliged to carry through each successive step: but the commissioners found
that” there was never any possibility that the appellant taxpayers and
another party would not proceed from one critical stage to another. I
reached the conclusion, on this finding and on the documents, that the
machinery, once started, would follow out its instructions without further
initiative and the same point was mad graphically by Lord Russell of
Killowen (1.c. p.22). This case shows, in my opinion, that although separate
steps were ” genuine” and had to be accepted under the Westminster
doctrine, the court could, on the basis of the findings made and of its own
analysis in law, consider the scheme as a whole and was not confined to a
step by step examination.
To hold, in relation to such schemes as those with which we are
concerned, that the court is not confined to a single step approach, is thus a
logical development from existing authorities, and a generalisation of
particular decisions.
Before I come to examination of the particular schemes in these cases,
there is one argument of a general character which needs serious
consideration. For the taxpayers it was said that to accept the Revenue’s
wide contention involved a rejection of accepted and established canons, and
that if so general an attack upon schemes for tax avoidance as the
Revenue suggest is to be validated, that is a matter for Parliament. The
function of the courts is to apply strictly and correctly the legislation which
Parliament has enacted: if the taxpayer escapes the charge, it is for
Parliament, if it disapproves of the result, to close the gap. General
principles against tax avoidance are, it was claimed, for Parliament to
lay down. We were referred, at our request, in this connection to the
various enactments by which Parliament has from time to time tried to
counter tax avoidance by some general prescription. The most extensive of
these is Income and Corporation Taxes Act 1970 sections 460 et seq. We
referred also to well known sections in Australia and New Zealand
(Australia. Income Tax Assessment Act 1936 51 section 260; New Zealand,
Income Tax Act 1976 section 99, replacing earlier legislation). Further it,
was pointed out that the Capital Gains Tax legislation (starting with the
Finance Act 1965) does not contain any provision corresponding to section
460. The intention should be deduced therefore, it was said, to leave Capital
Gains Tax to be dealt with by “hole and plug ” methods: that such schemes
as the present could be so dealt with has been confirmed by later legislation
as to “value shifting” (Capital Gains Tax Act 1979 section 25 et seq.).
These arguments merit serious consideration. In substance they appealed
to the Chief Justice of Australia in the recent case of F.C.T. v. Westraders
Pty Ltd (1980) 30 ALR 353, 354-5.
I have a full respect for the principles which have been stated but I
do not consider that they should exclude the approach for which the Crown
contends. That does not introduce a new principle: it would be to apply
to new and sophisticated legal devices the undoubted power and duty of
the courts to determine their nature in law and to relate them to existing
legislation. While the techniques of tax avoidance progress and are
technically improved, the courts are not obliged to stand still. Such
immobility must result either in loss of tax, to the prejudice of other
taxpayers, or to Parliamentary congestion or (most likely) to both. To force
the courts to adopt, in relation to closely integrated situations, a step by step,
dissecting, approach which the parties themselves may have negated, would
be a denial rather than an affirmation of the true judicial process. In each
case the facts must be established, and a legal analysis made: legislation
cannot be required or even be desirable to enable the courts to arrive at a
conclusion which corresponds with the parties’ own intentions.
The Capital Gains Tax was created to operate in the real world, not that
of make-belief. As I said in Aberdeen Construction Group Ltd. v. I.R.C.
[1978] AC 885, it is a tax on gains (or I might have added gains less
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losses), it is not a tax on arithmetical differences. To say that a loss (or
gain) which appears to arise at one stage in an indivisible process, and
which is intended to be and is cancelled out by a later stage, so that at the
end of what was bought as, and planned as, a single continuous operation,
is not such a loss (or gain) as the legislation is dealing with, is in my opinion
well and indeed essentially within the judicial function.
We were referred, on this point, to a number of cases in the United
States of America in which the courts have denied efficacy to schemes or
transactions designed only to avoid tax and lacking otherwise in economic
or commercial reality. I venture to quote two key passages, not as authority,
but as examples, expressed in vigorous and apt language of a process of
thought which seem to me not inappropriate for the courts in this country
to follow. In Knetsch v. U.S. (1960) 364 U.S. 361 the Supreme Court
found that a transaction was a sham because it:
” did not appreciably affect the [taxpayer’s] beneficial interest . . . there
” was nothing of substance to be realised by (him) from this transaction
” beyond a tax deduction … the difference between the two sums was
” in reality the fee for providing the facade of ‘ loans ‘ “.
In Gilbert v. Commissioner (1957) 248 Fed. 2nd 399. Judge Learned Hand
(dissenting on the facts) said:
” The Income Tax Act imposes liabilities upon taxpayers based upon
” their financial transactions. … If, however, the taxpayer enters
” into a transaction that does not appreciably affect his beneficial interest
” except to reduce his tax. the law will disregard it “.
It is probable that the U.S. courts do not draw the line precisely where
we with our different system allowing less legislative power to the courts
than they claim to exercise, would draw it, but the decisions do at least
confirm me in the belief that it would be an excess of judicial abstinence to
withdraw from the field now before us.
I will now try to apply these principles to the cases before us.
W. T. Ramsay Ltd v. Commissioner of Inland Revenue
This scheme, though intricate in detail, is simple in essentials. Stripped
of the complications of company formation and acquisition, it consisted of
the creation of two assets in the form of loans, called L.1. and L.2, each of
£218,750. These were made by the taxpayer, by written offer and oral
acceptance, on 23rd February, 1973 to one of the intra scheme
companies Caithmead Ltd. The terms are important and must be set
out. They were:
(a) L.1 was repayable after 30 years at par and L.2 was repayable
after 31 years at par. in each case with the proviso that Caithmead
could (but on terms) make earlier repayment if it so desired and
would be obliged to do so if it went into liquidation;
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If either loan were repaid before its maturity dale, then it had to
be repaid at par or at its market value upon the assumption that it
would remain outstanding until its maturity date—whichever was
the higher; -
Both loans were to carry interest at 11%, per annum payable
quarterly on 1st March, 1st June, 1st September and 1st December
in each year, the first such payment to be on 1st March 1973; -
The appellant was to have the right, exercisable once and once
only, and then only if it was still the beneficial owner of both L.1
and L.2, to decrease the interest rate on one of the loans and to
increase correspondingly the interest rate on the other.
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A few days later, on 2nd March 1973, the appellant, under (d) above,
increased the rate of interest on L.2 to 22%, and decreased that on L.1 to
zero. The same day the appellant then sold L.2 (which had naturally
increased in value) for £391,481. This produced a “gain” of £172,731
which the appellant contends is not a chargeable gain for corporation tax
purposes (as to this see below). L.2 was later transferred to a wholly
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owned subsidiary of Caithmead and extinguished by the liquidation of that
subsidiary. On 9th March, 1973 Caithmead itself went into liquidation, on
which L.1 was repayable, and was repaid to the appellant. The shares in
Caithmead, however, for which the appellant had paid £185,034, became of
little value and the appellant sold them to an outside company for £9,387.
So the appellant made a ” loss ” of £175,647. It may be added, as regards
finance, that the necessary money to enable the appellant to make the loans
was provided by a finance house on terms which ensured that it would be
repaid out of the loans when discharged. The taxpayer provided no finance.
Of this scheme, relevantly to the preceding discussion, the following can
be said—
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As the tax consultants’ letter explicitly states “the scheme is a pure
” tax avoidance scheme and has no commercial justification in so far as
” there is no prospect of T [the prospective taxpayer] making a profit; indeed
” he is certain to make a loss representing the cost of undertaking the
” scheme “. -
As stated by the tax consultants’ letter, and accepted by the special
commissioners, every transaction would be genuinely carried through and
in fact be exactly what it purported to be. -
It was reasonable to assume that all steps would, in practice, be
carried out, but there was no binding arrangement that they should. The
nature of the scheme was such that once set in motion it would proceed
through all its stages to completion. -
The transactions regarded together, and as intended, were from the
outset designed to produce neither gain nor loss: in a phrase which has
become current, they were self cancelling. The ” loss ” sustained by the
appellant, through the reduction in value of its shares in Caithmead, was
dependent upon the “gain ” it had procured by selling L.2. The one could
not occur without the other. To borrow from Rubin v. U.S. (1962) 304 Fed.
2nd 766 approving the Tax Court in MacRae 34 T.C. 20. 26, this loss was
the mirror image of the gain. The appellant would not have entered upon
the scheme if this had not been so. -
The scheme was not designed, as a whole, to produce any result for
the appellant or anyone else, except the payment of certain fees for the
scheme. Within a period of a few days, it was designed to and did return
the appellant except as above to the position from which it started. -
The money needed for the various transactions was advanced by a
finance house on terms which ensured that it was used for the purposes of
the scheme and would be returned on completion, having moved in a circle.
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On these facts it would be quite wrong, and a faulty analysis, to pick out,
and stop at, the one step in the combination which produced the loss, that
being entirely dependent upon, and merely a reflection of the gain. The true
view, regarding the scheme as a whole, is to find that there was neither gain
nor loss, and I so conclude.
Although this disposes of the appeal, I think it right to express an opinion
upon the particular point which formed the basis of the decisions below.
This is whether the gain made on 9th March 1973 by the sale of L.2 was a
chargeable gain. The assumption here, of course, is that it is permissible
to separate this particular step from the whole.
The appellant claims that the gain is not chargeable on the ground that
the asset sold was a debt within the meaning of the Finance Act 1965,
Schedule 7, paragraph 11. In that case, since the appellant was the
original creditor, the disposal would not give rise to a chargeable gain. The
Crown on the other hand contends that it was a debt on a security, within
the meaning of the same paragraph, and of paragraph 5(3)(b) of the same
Schedule. In that case the exemption in favour of debts would not apply.
The distinction between a debt, and a debt on a security, and the criteria
of the difference, have already been the subject of consideration in the
Court of Session in Cleveleys Investment Trust Co. v. I.R.C. 47 T.C. 300:
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Aberdeen Construction Group Ltd v. I.R.C. 1977 S.C 302, and in this
House in the latter case [1978] AC 885. I think it no overstatement to say
that many learned judges have found it baffling, both on the statutory
wording and as to the underlying policy. I suggested some of the difficulties
of paragraph 11 (supra) and of the definition in paragraph 5(3)(b) of the
same Schedule in Aberdeen Construction and I need not recapitulate them.
Such positive indications as have been detected are vague and uncertain.
It can be seen, however, in my opinion, that the legislature is endeavouring
to distinguish between mere debts, which normally (though there are
exceptions), do not increase but may decrease in value, and debts with added
characteristics such as may enable them to be realised, or dealt with at a
profit. But this distinction must still be given effect to through the
words used.
Of these, some help is gained from a contrast to be drawn between debts
simpliciter, which may arise from trading and a multitude of other situations,
commercial or private, and loans, certainly a narrower class, and one which
presupposes some kind of contractual structure. In Aberdeen Construction
I drew the distinction between ” a pure unsecured debt as between the
” original borrower and lender on the one hand and a debt (which may be
” unsecured) which has, if not a marketable character, at least such
” characteristics as enable it to be dealt in and if necessary converted into
” shares or other securities “.
To this I would now make one addition and one qualification. Although
I think that, in this case, the manner in which L.2 was constituted, viz., by
written offer, orally accepted together with evidence of the acceptance by
statutory declaration, was enough to satisfy a strict interpretation of
” security “, I am not convinced that a debt, to qualify as a debt on a
security, must necessarily be constituted or evidenced by a document. The
existence of a document may be an indicative factor, but absence of one is
not fatal. I would agree with the observations of my noble and learned
friend, Lord Fraser of Tullybelton, in relation, in particular, to Cleveleys’
case. Secondly, on reflection, I doubt the usefulness of a test enabling the
debt to be converted into shares or other securities. The definition in
paragraph 5(3)(b) (supra) is, it is true, expressed to be given for the purposes
of paragraph 3 which is dealing with conversion: but I suspect that it was
false logic to suppose that, because of this, ” securities ” are to be so limited,
and in any event I doubt whether the test supposed, if a necessary one, is
useful, for even a simple debt can, by a suitable contract, be converted into
shares or other securities.
With all this lack of certainty as to the statutory words, I do not feel any
doubt that in this case the debt was a debt on a security. I have already
stated its terms. It was created by contract whose terms were recorded in
writing; it was designed, from the beginning, to be capable of being sold,
and, indeed, to be sold at a profit. It was repayable after 31 years, or on
the liquidation of Caithmead. If repaid before the maturity date, it had to
be repaid at par or market value whichever was the higher. It carried a
fixed, though (once) variable rate of interest.
There was much argument whether with these qualities it could be
described as ” loan stock ” within the meaning of paragraph 5(3)(b) of
Schedule 7 (supra). I do not find it necessary to decide this. The paragraph
includes within ” security ” any ” similar security ” to loan stock: in my
opinion these words cover the facts. This was a contractual loan, with a
structure of permanence such as fitted it to be dealt in and to have a market
value. That it had a market value, in fact, was stated on 1st March 1973
by Messrs. Hoare and Co. Govett Ltd., Stockbrokers. They then confirmed
that an 80% premium would be a fair commercial price having regard to the
prevailing levels of long term interest rates. I have no doubt that, on these
facts, the loan L.2 was a debt on a security and therefore an asset which, if
disposed of, could give rise to a chargeable gain.
I would dismiss this appeal.
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I now deal with the Rawling appeal.
The scheme here was quite different from any of the others which I have
discussed. It sought to take advantage of paragraph 13(1) of Schedule 7 to
the Finance Act, 1965: this exempts from capital gains tax any gain
made on the disposal of (inter alia) a reversionary interest under a settlement
by the person for whose benefit the interest was created or by any other
person other than one who acquired the interest for consideration in money.
The scheme was, briefly, to split a reversion into two parts so that one would
be disposed of at a profit but would fall under the exemption and the other
would be disposed of at a loss but could be covered by the exception. Thus
there would be an allowable loss but a non-chargeable gain.
The scheme involved the use of a settlement set up in Gibraltar, another
settlement set up in Jersey, and six Jersey companies—namely, to use their
short titles Thun, Goldiwill, Pendle, Tortola, Allamanda and Solandra,
which were part of the same organisation, under the same management and
operating from the same address: The Gibraltar settlement was made in
1973 by one Isola of a sum of £100. When the appellant came into the
scheme in 1975 the fund consisted of £600,000, all of which was said to be
deposited in Jersey with Thun. The trusts were to pay the income to one
Josephine Isola until 19th March 1976. Subject thereto the fund was to
be held in trust for the settlor, Isola, his heirs and assignees. There was a
power in clause 5 of the settlement to advance any part of the capital of
the trust fund to the Reversioner or to the trustees of any other settlement.
But it was a necessary condition, in the latter case, that the Reversioner
should be indefensibly entitled to a corresponding interest under such other
settlement falling into possession not later than the vesting day (19th March
1976) under the Gibraltar Settlement. On the exercise of any such power
a compensating advance had to be made to the income beneficiary.
On 20th March 1975 the settlor’s reversionary interest was assigned to
Pendle. On 24th March 1975 Thun agreed to lend the appellant £543,600
to enable him to buy the Gibraltar settlement reversion and agreed with
the appellant that Tortola would, if required within 6 months, introduce to
the appellant a purchaser for the reversion. Pendle then agreed to sell and
the appellant to buy the reversion for £543,600 and this sale was completed.
So the appellant (conformably with paragraph 13(1) supra) had acquired a
reversion for consideration in money. The appellant directed Thun to pay
the £543,600 to Pendle: he also charged his reversionary interests under the
Gibraltar settlement and under the Jersey settlement, next mentioned, to
Thun to secure the loan of £543,600.
The Jersey settlement was executed, as found by the General
Commissioners, as part of the scheme. It was dated 21st March 1975 and
made by the appellant’s brother for £100 with power to accept additions.
The trustee was Allamanda. The trustee was to apply the income for
charitable or other purposes until the ” Closing Date ” and subject thereto
for the appellant absolutely. The closing date was fixed on 24th March
1975 as a date not later than 19th March 1976—the vesting date under the
Gibraltar settlement (the exact date seems not to be proved).
On 25th March 1975 the appellant requested the Gibraltar trustee to
advance £315,000 to the Jersey settlement, to be held as capital of that
settlement. On 27th March 1975 the Gibraltar trustee appointed £315,000
accordingly, and also appointed £29,610 to compensate the income
beneficiary, which had become Goldiwill. These appointments were given
effect to by Thun transferring money in Jersey to Allamanda, the Jersey
trustee, and Goldiwill. So the appellant was now a person for whose benefit
a reversion had been created under the Jersey settlement (see again
paragraph 13(1) supra). There was left £255,390 unappointed in the
Gibraltar settlement.
On 1st April 1975 the appellant requested Thun to cause Tortola to
nominate a purchaser of his interest under the Gibraltar settlement and on
3rd April Tortola nominated Goldiwill. Also on 3rd April the appellant
agreed to sell his reversion under the Gibraltar settlement to Goldiwill for
9
£231,130: the agreement recited that the trust fund then consisted of
£255,390. The appellant assigned his reversion accordingly. This is the
transaction supposed to create the loss. Also on 3rd April 1975, the
appellant agreed to sell his reversion under the Jersey settlement to Thun for
£312,100. The agreement recited that the trust fund then consisted of
£315,100. Payment for these various transactions was effected by
appropriations by Thun. The price for the two reversions (£231,130 and
£312,100) making £543,230 due to the taxpayer was set off against the
loan of £543,600 made by Thun, leaving a balance due to Thun of £370.
The appellant paid this and Thun released its charges. The only money
which passed from the appellant was the £370, £3,500 procuration fee, and
£6,115 interest.
Of this scheme the following can be said:
-
-
-
The scheme was a pure tax avoidance scheme, designed by Thun
and entered into by the appellant for the sole purpose of manufacturing
a loss matched by a corresponding but exempt capital gain. It was
marketed by Thun as a scheme available to any taxpayer who might
purchase it, the sums involved being adapted to the purchaser’s
requirements. -
Every individual transaction was, as found by the general
commissioners, carried through and was exactly what it purported to be. -
It was held by the judge and not disputed by the Court of Appeal
that by its agreement with the appellant, Thun agreed to procure the
implementation of all the steps comprised in the scheme and was in a
position to obtain the co-operation of the associated companies Pendle
and Goldiwill. -
The scheme was designed to return all parties within a few days
to the position from which they started, and to produce for the appellant
neither gain nor loss, apart from the expenses of the scheme, the gain and
the loss being ” self-cancelling ” The loss could not be incurred without
the gain, because it depended upon the reversion under the Gibraltar
settlement being diminished by the appointed sum of £315,000 which
produced the gain. The appellant would not have entered into the scheme
unless this had been the case. -
The scheme required nothing to be done by the appellant except
the signing of the scheme documents, and the payment of fees. The
necessary money was not provided by the appellant but was ” provided ”
by Thun on terms which ensured that it would not pass out of its control,
and would be returned on completion having moved if at all in a circle.
-
-
On these facts, it would be quite wrong, and a faulty analysis, to segregate,
from what was an integrated and interdependent series of operations, in one
step, viz. the sale of the Gibraltar reversion on 3rd April 1975, and to
attach fiscal consequences to that step regardless of the other steps and
operations with which it was integrated. The only conclusion, one which is
alone consistent with the intentions of the parties, and with the documents
regarded as interdependent, is to find that, apart from a sum not exceeding
£370, there was neither gain nor loss and I so conclude.
Although this disposes of the appeal I think it right to deal with the
particular point which, apart from the judgment of Templeman L.J.,
formed the basis of the decisions below. This is whether the sale of the
reversion under the Gibraltar settlement on 3rd April 1975 gave rise to an
allowable loss if regarded in isolation. I regard this, with all deference, as
a simple matter. What was sold on 3rd April 1975 was the appellant’s
reversionary interest in £255,390: for this the appellant received £231,130
certified by Solandra to be the market price. Not only was this the fact the
trust fund at that time was of that amount—but the agreement for sale
specifically so stated. It recited that the vendor, the appellant, was
beneficially entitled to the sole interest in reversion under the Gibraltar
settlement, ” being a settlement whereof the trust fund presently consist (sic)
” of £255,390 “. What he had bought, on the other hand, for £543,600 was
a reversionary interest in £600,000, subject to the trustee’s power to advance
10
any part to him or to a settlement in which he had an equivalent reversionary
interest. After the advance of £315,000 was made (effectively to the
appellant so that to this extent he had got back part of his money), all he
had to sell was the reversionary interest in the remainder: this he sold for
its market price. Alternatively, if the £315,000 is to be considered as in
some sense still held under the Gibraltar settlement, the sale on 3rd April
1975 to Goldiwill for £231,130 did not include it. On no view can he say
that he sold what he had bought: on no view can he demonstrate any loss.
I think that substantially this view of the matter was taken by Buckley L.J.
and Donaldson L.J., and I agree with their judgments.
I would dismiss this appeal.
Lord Fraser of Tullybelton
My Lords,
Each of these appeals raises one separate question of its own and one
wider question common to both. I shall consider the separate questions
first.
Ramsay
The appellant is a farming company. During its accounting period
ended 31st May 1973 it sold the freehold of its farm, and made a gain of
£187,977 which was chargeable for corporation tax purposes, on the same
principles as it would have been charged to capital gains tax in the case
of an individual.
Having taken expert advice, the appellant entered into a scheme to
create a capital loss which could be set off against that chargeable gain.
The essence of the scheme was that the appellant acquired two assets, one
of which increased in value at the expense of the other, and both which
were then disposed of. The asset which decreased in value consisted of
shares in a company called Caithmead Ltd., and the loss on that asset
was intended to be allowable for corporation tax purposes, and therefore
available to be set off against the gain on the farm. If that part of the
scheme is considered by itself, it worked as intended and produced an
allowable loss. The asset which increased in value was a loan to Caithmead
Ltd. It was one of two loans, and was referred to as L.2, and it was
intended to be exempt from corporation tax on chargeable gains. The
question in this appeal is whether that intention has been successfully
realised
The answer depends entirely on whether L.2 was ” the debt on a
“security” in the sense of the Finance Act 1965, Schedule 7 paragraph
11(1). If it was, the gain on its disposal was chargeable. If it was not,
the gain is not chargeable. The very unusual terms on which L.2 was
made by the appellant to Caithmead Ltd., have been described by my
noble and learned friend Lord Wilberforce and I need not repeat them.
The expression ” the debt on a security ” is not one which is familiar to
either lawyers or, I think, business men. Its meaning has been considered
in two cases to which we were referred. In Cleveleys Investment Trust Co.
v. I.R. 1971 S.C. 233, Lord Cameron pointed out at page 244 that whatever
else it may mean it ” is not a synonym for a secured debt “, and that is
generally agreed. Lord Migdale thought that it meant “an obligation to
” pay or repay embodied in a share or stock certificate …” Lord
Migdale’s view was accepted by all the learned judges of the First Division
in Aberdeen Construction Group Ltd. v. I.R. 1977 S.C. 265, but when
the Aberdeen case reached this House, the existence of a certificate was
not treated as the distinguishing feature of the debt on a security. Lord
Wilberforce at 1978 SC (HL) 72, 81 expressed the view that the
distinction was ” between a pure unsecured debt as between the original
” borrower and lender on the one hand and a debt (which may be
” unsecured) which has, if not a marketable character, at least such
11
” characteristics as enable it to be dealt in and if necessary converted into
” shares or other securities.” Lord Russell of Killowen at page 89 said
that loan stock ” suggests to my mind an obligation created by a company
” of an amount for issue to subscribers for the stock, having ordinarily
” terms for repayment with or without premium and for interest.” No
disapproval of the observations in the Court of Session was expressed,
and I expressed general agreement with them. The authors of the scheme
in this appeal may have had these observations in mind when they devised
the scheme, as they went to some trouble to avoid having any certificate
or voucher of the debt, and relied instead on a statutory declaration
setting out the terms and conditions of the loan.
Further consideration has satisfied me that the existence of a document
or certificate cannot be the distinguishing feature between the two classes
of debt. If Parliament had intended it to be so, that could easily have
been stated in plain terms and there would have been no purpose in using
the strange phrase “the debt on a security” in paragraph 11(1) of
Schedule 7, or in referring to the ” definition ” of security in paragraph 5.
The distinction in paragraph 11(1) is, I think, between a simple unsecured
debt and a debt of the nature of an investment, which can be dealt in and
purchased with a view to being held as an investment. The reason for
the provision that no chargeable gain should accrue on disposal of a
simple debt by the original creditor must have been to restrict allowable
losses (computed in the same way as gains—Finance Act 1965, section 23,
which was the relevant statute in 1973) because the disposal of a simple
debt by the original creditor or his legatee will very seldom result in a
gain. No doubt it is possible to think of cases where a gain may result,
but they are exceptional. On the other hand it is all too common for
debts to be disposed of by the original creditor at a loss, and if such
losses were allowed for capital gains tax it would be easy to avoid tax
by writing off bad debts—for example those owed by impecunious relatives.
But debts on a security, being of the nature of investments, are just as
likely to be disposed of by the original creditor at a gain as they are at a
loss, and they are subject to the ordinary rule.
The features of the debt L.2 in the present case which in my opinion
take it out of the class of simple debts into the class of debts on a security
are these. First and foremost, the debtor was not bound to repay it for
31 years. Such a long fixed term is unusual for a debt, but it is typical
of a loan stock (a term which I use hereafter to include similar securities).
Secondly, the debtor was entitled to repay it sooner, and bound to repay
it on liquidation, but in either of these cases only at the higher of face
value or market value, market value being calculated on the assumption
that it would remain outstanding for the full period of 31 years. Conditions
of that sort are very unusual when attached to a debt, but are characteristic
of a loan stock. Thirdly, it bore interest and thus produced income to
the creditor, as an investment such as loan stock normally does but as
debts normally do not. For example, the debt owed by a subsidiary
company to its parent company in the Aberdeen case did not carry interest.
It is to be observed that paragraph 11(1) refers not to loan but to
” debt ” and thus includes ordinary trade debts which rarely carry interest.
Fourthly, being a long term interest-bearing debt, it possessed the
characteristic of marketability. Indeed, L.2 was created only in order to
be sold at a profit and it was so sold. It could have been sold and assigned
in part like loan stock, although an action to enforce payment might have
required the concurrence of the original creditor.
If L.2 had been surrendered and its proceeds used to pay for shares,
it could in a loose sense be said to have been ” converted ” into shares
or a new loan. But it was no more, and no less, convertible than a simple
debt, and I do not consider that convertibility is a distinguishing factor
of a loan on a security.
Counsel for the appellant said that a loan stock had to be capable of
being ” issued ” and ” subscribed for ” and that L.2 did not satisfy these
12
requirements. But I agree with Templeman L.J. that L.2 was in fact
issued and subscribed for although the processes were simple because only
one lender was involved.
For these reasons I agree with the Court of Appeal that L.2 fell within
the description of a debt on a security and that the appellant’s gain on
disposal of it was chargeable. I would dismiss this appeal on that ground.
Rawling v. Eilbeck
This is another scheme designed to eliminate or reduce a capital gain.
In this case the gain arose from sales of shares and amounted to about
£355,000. Again, the details of the scheme have been explained by my
noble and learned friend Lord Wilberforce, and I refer only to its essential
elements. On 24th March 1975 the appellant acquired for £543,600 an
asset, consisting of the reversionary interest under a settlement made in
Gibraltar and administered by a trustee in Gibraltar. The appellant claims
that on 3rd April 1975 he sold the same asset for £231,130 thereby making
a loss of £312.470. The reason why the sale price was so much lower
than the cost price of what is said to be the same asset only ten days
earlier was that the trustee, in the exercise of a power under clause 5(2)
of the settlement, had appointed £315.000 out of the capital trust fund
to the trustees of another settlement. The other settlement had been made
in Jersey and was administered by a trustee in Jersey. (The geographical
location of these trusts is entirely irrelevant to the question raised in this
appeal, which would be the same if both trusts had been in England).
The appellant maintains that the reduction in the amount of the Gibraltar
trust fund, and hence in the value of his reversionary interest in it, did
not affect the continuing identity of the fund or of his interest. He says
that his interest was in the assets of the fund, as they existed from time
to time, and that it remains the same interest notwithstanding a change
in the individual assets or in their value.
My Lords. I do not accept that contention. No doubt it would have
been correct if the fall in value of the Gibraltar trust fund had been
brought about merely by a fall in the value of its component assets, for
instance, if the total value of the trust investments had fallen, or even if
some of the investments have been altogether lost. But the position is
entirely different in this case where the trust fund was divided into two
parts, of which one was handed over to the Jersey trustee and the other
was retained by the Gibraltar trustee. The retained fund was not the
whole fund in which the appellant had bought an interest. It was only
part of the fund and the reversionary interest in the retained part was
only part of the reversionary interest which the appellant had bought. If
the fund had been invested in stocks and shares, or other assets, it would
have been necessary to apportion the assets to one or other part of the
fund. This would have been more obvious if the retained fund had been
sold before the appointment in favour of the Jersey settlement had been
made; in that case the sale would expressly have been of part only of the
total fund. It follows therefore that the appellants claim to have sustained
a loss measured by the difference between the cost of the whole reversionary
interest and the price realised for part of it must fail.
That is enough to negative the appellant’s claim as put forward, but I
would go further and would adopt the analysis by Buckley L.J. of the
true position. In the circumstances of this case, where the appointment
by the Gibraltar trustee was made under a special power, I agree with
Buckley and Donaldson L.JJ. that the appellant’s reversionary interest in
the appointed fund is properly to be regarded as part of his interest in
the Gibraltar fund. Buckley L.J. (but not Donaldson L.J.) assumed that
the ” closing date ” appointed by the trustee of the Jersey settlement was
the same as the ” vesting day ” under the Gibraltar settlement—that is
19th March 1976. There is no finding to that effect and we were told
that the ” closing date ” probably was 6th May 1975. But the identity
of dates was not essential to the reasoning on which Buckley L.J. proceeded.
The position was that, after the appointment, the appointed fund was
13
held by the Jersey trustee for purposes which, although in some respects
different from those of the Gibraltar settlement (the tenant for life being
different and the closing date probably being different), were within the
limits laid down in the Gibraltar settlement. In particular the reversioner
was the same and the closing date was not later than the vesting date in
the Gibraltar settlement. If the differences had not been within the
permitted limits the appointment would of course not have been intra vires
the Gibraltar trustee. Accordingly the true price realised on disposal of
the appellant’s interest was in my opinion the sum of the price of the
retained fund in Gibraltar (£231,130) and of the appointed fund in Jersey
(£312,100), amounting to £543,230. His loss was therefore about £370.
For these reasons I would dismiss this appeal.
Wider Question—Was there a disposal in either of these cases?
The Inland Revenue maintain that they are entitled to succeed in both
these appeals on the wider ground that in neither case was there a disposal
of the loss-making asset in the sense in which disposal is used in the
Finance Act 1965 Schedule 7. On behalf of the taxpayer in each case
reliance was placed on the finding by the special commissioners that the
various steps in the scheme were not shams. The meaning of the word
” sham ” was considered by Diplock L.J. in Snook v. London and West
Riding Investments Ltd. [1967] 2 Q.B. 786, 802, where he said that ” it
” means acts done or documents executed by the parties to the ‘ sham ‘
” which are intended by them to give to third parties or to the court the
” appearance of creating between the parties legal rights and obligations
” different from the actual legal rights and obligations (if any) which the
” parties intend to create.” Thus an agreement which is really a hire
purchase agreement but which masquerades as a lease would be a sham.
Although none of the steps in these cases was a sham in that sense, there
still remains the question whether it is right to have regard to each step
separately when it was so closely associated with other steps with which
it formed part of a single scheme. The argument for the Revenue in both
appeals was that that question should be answered in the negative and that
attention should be directed to the scheme as a whole. This question
must, of course, be considered on the assumption that the taxpayer would
have been entitled to succeed on the separate point in each case.
In my opinion the argument of the Inland Revenue is well founded and
should be accepted. Each of the appellants purchased a complete
prearranged scheme, designed to produce a loss which would match the
gain previously made and which would be allowable as a deduction for
corporation tax (capital gains tax) purposes. In these circumstances the
court is entitled and bound to consider the scheme as a whole, see
Plummer v. C.I.R. [1980J A.C. 896, 907, Chinn v. Hochstrasser [1981]
2 W.L.R. 14. The essential feature of both schemes was that, when they
were completely carried out, they did not result in any actual loss to the
taxpayer. The apparently magic result of creating a tax loss that would
not be a real loss was to be brought about by arranging that the scheme
included a loss which was allowable for tax purposes and a matching gain
which was not chargeable. In Ramsay the loss arose on the disposal of
the appellant’s shares in Caithmead Ltd. In Rawlings it arose on the
disposal of the appellant’s reversionary interest in the retained part of the
Gibraltar settlement. But it is perfectly clear that neither of these disposals
would have taken place except as part of the scheme, and, when they
did take place, the taxpayer and all others concerned in the scheme knew
and intended that they would be followed by other prearranged steps
which cancelled out their effect. In Rawlings the intention was made
explicit as the supplier of the scheme, a company called Thun Holdings
Ltd., bound itself contractually, if the scheme was once embarked upon,
to carry through all the steps. There is, therefore, no reason why the
court should stop short at one particular step. In Ramsay the supplying
company, Dovercliffe Ltd., did not undertake any contractual obligation
to carry the scheme through, but was a clear understanding between the
taxpayer and Dovercliffe that the whole scheme would be carried through;
14
that was why the taxpayer had purchased the scheme. The absence of
contractual obligation does not in my opinion make any material difference.
The taxpayer in both cases bought a complete scheme for which he
paid a fee. Thereafter he was not required to produce any more money,
although large sums of money were credited and debited to him in the
course of the complicated transactions required to carry out the scheme.
The money was lent to the taxpayer at the beginning of the scheme, by
Thun in the Rawlings case and by a finance company, Slater Walker, in
the Ramsay case, and was repaid to the lender at the end. The taxpayer
never at any stage had the money in his hands nor was he ever free to
dispose of it otherwise than in accordance with the scheme. His interest
in the assets, the shares and loans in the Ramsay case and the trust funds
in the Rawlings case, were charged in favour of the lenders by way of
security, so that he was never in a position to require the price of any
asset that was sold to be paid to him. Throughout the whole series of
transactions the money was kept within a closed circuit from which it
could not escape.
In Rawlings there was not even any need for real money to be involved
at all. On 24th March 1975 Thun agreed to lend the taxpayer £543,600
to enable him to purchase the reversionary interest in the Gibraltar
settlement. On the same day the taxpayer agreed to purchase, and Pendle
(a subsidiary company of Thun) agreed to sell the reversionary interest
to him and assign it to him, and the taxpayer directed Thun to pay the
£543,600 to Pendle. The taxpayer never handled the money, and
presumably the payment to Pendle was effected by an entry in the books
of Thun, though it was not proved that such an entry was made. When
the taxpayer sold his reversionary interest in the Gibraltar settlement to
another subsidiary of Thun, it was already charged to Thun in security
and the purchase price was paid by the subsidiary to Thun, again
presumably by an entry in Thun’s books. His reversionary interest in the
Jersey settlement was sold direct to Thun and the balance of Thun’s
original loan to the taxpayer was extinguished. There was apparently
no evidence before the special commissioners that Thun actually possessed
the sum of £543,600 which they lent to the taxpayer to set the scheme in
motion, not to mention any further sums that they may have lent to other
taxpayers for other similar schemes which may have been operating at the
same time, and it might well have been open to the special commissioners
to find that the loan, and all that followed upon it, was a sham. But
they have not done so. In Ramsay ” real ” money in the form of a loan
from Slater Walker was used so that a finding of sham in that respect
would not have been possible.
Counsel for the taxpayer naturally pressed upon us the view that if we
were to refuse to have regard to the disposals which took place in the
course of these schemes, we would be departing from a long line of
authorities which required the courts to regard the legal form and nature
of transactions that have been carried out. My Lords, I do not believe
that we would be doing any such thing. I am not suggesting that the
legal form of any transaction should be disregarded in favour of its
supposed substance. Nothing that I have said is in any way inconsistent
with the decision in the Duke of Westminster’s case [1936] AC 1 where
there was only one transaction—the grant of an annuity—and there was
no question of its having formed part of any larger scheme. The view
that I take of this appeal is entirely consistent with the decision in Chinn
v. Hochstrasser, supra, and it could in my opinion have been the ground
of decision in Floor v. Davis [1980] A.C. 695 in accordance with the
dissenting opinion of Eveleigh L.J. in the Court of Appeal with which I
respectfully agree. In that case the taxpayer wished to dispose of shares
in a company to an American company called KDI at a price which
would have produced a large chargeable gain. In order to avoid the
liability to capital gains tax he adopted a scheme which involved the
incorporation of another company, FNW, to which he transferred his shares
in order that they could subsequently be transferred by FNW to KDI
Eveleigh LJ. said at [1978] 3 W.L.R. 360, 376C:
15
” I see this case as one in which the court is not required to
” consider each step taken in isolation. It is a question of whether
” or not the shares were disposed of to KDI by the taxpayer. I
” believe that they were. Furthermore, they were in reality at the
” disposal of the original shareholders until the moment they reached
” the hand of KDI, although the legal ownership was in FNW. I
” do not think that this conclusion is any way vitiated by Inland Revenue
” Commissioners v. Duke of Westminster. In that case it was sought
” to say that the payments under covenant were not such but were
” payments of wages. I do not seek to say that the transfer to FNW
” was not a transfer. The important feature of the present case is
” that the destiny of the shares was at all times under the control of
” the taxpayer who was arranging for them to be transferred to KDI.
” The transfer to FNW was but a step in that process.”
In my opinion the reasoning contained in that passage is equally applicable
to the present appeals.
Accordingly I would refuse both appeals on the additional ground that
the relevant asset in each case was not disposed of in the sense required
by the statutes.
Lord Russell of Killowen
my lords,
I find myself in full agreement with what has fallen from My Lords
Wilberforce and Fraser of Tullybelton both on the features peculiar to these
cases and on the general principles enunciated by them. I cannot hope for
and will not attempt any improvements.
I am however unable to resist the temptation to a brief comment on the
Rawling case. That comment is that I wholly fail to comprehend the
contention that the taxpayer sustained a loss (unless it be £370). The moneys
advanced into the Jersey settlement, out of the Gibraltar settlement funds
in which the taxpayer had acquired an absolute reversionary interest,
conferred upon the taxpayer an absolute reversionary interest in the
advanced funds which could not fall into possession later than it would have
done under the Gibraltar settlement. The power of advancement was
so framed that no other outcome was possible. Thus the taxpayer
remained absolutely entitled in reversion to the funds. When the taxpayer
sold his interest in the remaining unadvanced fund he sold only part of
his reversionary interest. If the sequence of events had been sale of his
reversionary interest in £255,390 to Goldiwill, followed by advancement of
the remaining £315,000 into the Jersey settlement, nobody could begin to
suggest that there was a loss made on the sale of Goldiwill. This to my
mind demonstrates the absurdity of the suggestion that a loss was incurred
by the taxpayer by a reverse of that sequence. There was a further power
under the Gibraltar settlement to advance directly into the taxpayer’s pocket,
and it was found necessary to the taxpayer’s claim of a loss that, if that had
happened, there would nevertheless have been the loss asserted on the
disposal of his reversionary interest in the remainder to Goldiwill. That
cannot possibly be right.
Lord Roskill
my lords,
I have had the advantage of reading in draft the speeches of my noble
and learned friends Lord Wilberforce and Lord Fraser of Tullybelton in
these two appeals. I agree entirely with what my noble and learned friends
have said and for the reasons they give I would dismiss both appeals.
16
Lord Bridge of Harwich
my lord,
I have had the advantage of reading in draft the speech of my noble and
learned friend Lord Wilberforce. I am in complete and respectful agreement
with it and cannot usefully add anything to it: accordingly I, too, would
dismiss both these appeals.
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