What do tax lawyers talk about at lunch? In my case, it’s been the UK Supreme Court’s majority decision (4:1) in Royal Bank of Canada [2025] UKSC 2. It seems so unusual these days to have a split Supreme Court decision that it is worth delving deeper into Lord Briggs’ dissent in that case – not least because it’s on the scope of something that has become a fundamental tenet of tax law, the Ramsay principle of statutory construction.
What was Lord Briggs’ dissenting judgment about? Lord Briggs’ ‘lonely disagreement’ with the majority stems from a philosophical disagreement around how the Ramsay principle ought to have been applied. The Ramsay principle is a principle of statutory interpretation which, broadly, holds that statutes should be interpreted purposively and applied to a realistic view of the facts at hand.
It appears that Lord Briggs interpreted Lady Rose’s judgment as narrowing the scope of the Ramsay principle. Specifically, Lord Briggs’ concern is that Lady Rose’s judgment relegates the Ramsay principle to being a tool to be used to combat tax avoidance schemes and nothing more.
In his dissent, Lord Briggs rightly points out that whilst the application of the Ramsay principle is usually in the context of tax avoidance schemes, the application of Ramsay is by no means limited to those circumstances.
Did Lady Rose’s judgment really narrow the Ramsay principle? The short answer is that it is possible. That itself is surprising given that the Ramsay principle is well established and, until this judgment, there was no reason to question the application of the Ramsay principle (in a domestic statutory context at least).
Indeed, if the answer were ‘yes’ that would mean undoing decades of precedent (thereby leaving the application of Ramsay in limbo), and that Lady Rose’s opinion on the application of the Ramsay principle changed (arguably quite drastically) since the end of 2024. In the unanimous judgment in Cobalt Data Centre [2024] UKSC 40, she agreed with Lord Briggs (who gave the lead judgment) that the Ramsay principle ought to be applied in a non-tax avoidance scenario.
In her judgment, Lady Rose refers to Ramsay precisely twice and makes two broad-brush statements: first, that none of the parties suggested the Ramsay principle was relevant and, second, that nothing in the judgment ‘casts doubt on the efficacy of those principles where they apply’ (my emphasis).
One can sympathise with Lord Briggs’ position in that, if the Ramsay principle must always apply then, by definition, it is always relevant. Any suggestion, even implicit, that the Ramsay principle may not apply has the effect of narrowing the principle to some extent.
It is also possible that Lady Rose did not seek to limit the Ramsay principle – after all, Lady Rose specifically stated that nothing in the majority judgment casts doubt on the efficacy of Ramsay.
The difficulties, however, are not limited to Lady Rose’s discussion of the Ramsay principle but extend to the framing of the majority judgment more generally. It would likely be far less a cause of concern if the majority judgment had concluded that the Ramsay principle applies but nonetheless, on a realistic view of the facts, dismissed HMRC’s appeal. Admittedly whilst that would have its own issues, that would have been a disagreement more easily characterised as applying to the specific facts of Royal Bank of Canada, the upshot being that it would not have opened fresh questions as to the basic application of the Ramsay principle.
Equally, the majority could have concluded that the Ramsay principle was not engaged because Royal Bank of Canada involved the interpretation of a double taxation treaty rather than domestic legislation, with Lord Briggs applying Ramsay by way of analogy in his dissent. That would have been an interesting discussion, looking at the intended function of double taxation treaties and the role of judicial interpretation as part of that. That conclusion would not have given rise to the same uncertainty as the existing majority judgment.
Where does this leave the Ramsay principle? Overall, the majority judgment opens up questions on the limitations of the Ramsay principle in non-tax avoidance scenarios where, previously, no such uncertainty existed.
Indeed, this majority judgment may end up providing a hook in non-tax avoidance scenarios to argue that the Ramsay principle should not apply to the facts at hand. In that vein, it is worth remembering the argument that the Ramsay principle should not be applied was (unsuccessfully) made before the Court of Appeal in Hargreaves where the Court of Appeal firmly set out that no statutory concept was ‘immune’ from Ramsay.
It will be interesting to see whether the Supreme Court makes use of the opportunity to address some of the fallout from Royal Bank of Canada when it hears the appeal in HFFX concerning the taxation of discretionary payments to LLP members under a partner incentive plan.
For now, it would be most sensible for taxpayers to continue to apply Ramsay in the ordinary course of organising their tax affairs as they would have prior to the judgment in Royal Bank of Canada.
Kasim Mehmood, Slaughter and May
What do tax lawyers talk about at lunch? In my case, it’s been the UK Supreme Court’s majority decision (4:1) in Royal Bank of Canada [2025] UKSC 2. It seems so unusual these days to have a split Supreme Court decision that it is worth delving deeper into Lord Briggs’ dissent in that case – not least because it’s on the scope of something that has become a fundamental tenet of tax law, the Ramsay principle of statutory construction.
What was Lord Briggs’ dissenting judgment about? Lord Briggs’ ‘lonely disagreement’ with the majority stems from a philosophical disagreement around how the Ramsay principle ought to have been applied. The Ramsay principle is a principle of statutory interpretation which, broadly, holds that statutes should be interpreted purposively and applied to a realistic view of the facts at hand.
It appears that Lord Briggs interpreted Lady Rose’s judgment as narrowing the scope of the Ramsay principle. Specifically, Lord Briggs’ concern is that Lady Rose’s judgment relegates the Ramsay principle to being a tool to be used to combat tax avoidance schemes and nothing more.
In his dissent, Lord Briggs rightly points out that whilst the application of the Ramsay principle is usually in the context of tax avoidance schemes, the application of Ramsay is by no means limited to those circumstances.
Did Lady Rose’s judgment really narrow the Ramsay principle? The short answer is that it is possible. That itself is surprising given that the Ramsay principle is well established and, until this judgment, there was no reason to question the application of the Ramsay principle (in a domestic statutory context at least).
Indeed, if the answer were ‘yes’ that would mean undoing decades of precedent (thereby leaving the application of Ramsay in limbo), and that Lady Rose’s opinion on the application of the Ramsay principle changed (arguably quite drastically) since the end of 2024. In the unanimous judgment in Cobalt Data Centre [2024] UKSC 40, she agreed with Lord Briggs (who gave the lead judgment) that the Ramsay principle ought to be applied in a non-tax avoidance scenario.
In her judgment, Lady Rose refers to Ramsay precisely twice and makes two broad-brush statements: first, that none of the parties suggested the Ramsay principle was relevant and, second, that nothing in the judgment ‘casts doubt on the efficacy of those principles where they apply’ (my emphasis).
One can sympathise with Lord Briggs’ position in that, if the Ramsay principle must always apply then, by definition, it is always relevant. Any suggestion, even implicit, that the Ramsay principle may not apply has the effect of narrowing the principle to some extent.
It is also possible that Lady Rose did not seek to limit the Ramsay principle – after all, Lady Rose specifically stated that nothing in the majority judgment casts doubt on the efficacy of Ramsay.
The difficulties, however, are not limited to Lady Rose’s discussion of the Ramsay principle but extend to the framing of the majority judgment more generally. It would likely be far less a cause of concern if the majority judgment had concluded that the Ramsay principle applies but nonetheless, on a realistic view of the facts, dismissed HMRC’s appeal. Admittedly whilst that would have its own issues, that would have been a disagreement more easily characterised as applying to the specific facts of Royal Bank of Canada, the upshot being that it would not have opened fresh questions as to the basic application of the Ramsay principle.
Equally, the majority could have concluded that the Ramsay principle was not engaged because Royal Bank of Canada involved the interpretation of a double taxation treaty rather than domestic legislation, with Lord Briggs applying Ramsay by way of analogy in his dissent. That would have been an interesting discussion, looking at the intended function of double taxation treaties and the role of judicial interpretation as part of that. That conclusion would not have given rise to the same uncertainty as the existing majority judgment.
Where does this leave the Ramsay principle? Overall, the majority judgment opens up questions on the limitations of the Ramsay principle in non-tax avoidance scenarios where, previously, no such uncertainty existed.
Indeed, this majority judgment may end up providing a hook in non-tax avoidance scenarios to argue that the Ramsay principle should not apply to the facts at hand. In that vein, it is worth remembering the argument that the Ramsay principle should not be applied was (unsuccessfully) made before the Court of Appeal in Hargreaves where the Court of Appeal firmly set out that no statutory concept was ‘immune’ from Ramsay.
It will be interesting to see whether the Supreme Court makes use of the opportunity to address some of the fallout from Royal Bank of Canada when it hears the appeal in HFFX concerning the taxation of discretionary payments to LLP members under a partner incentive plan.
For now, it would be most sensible for taxpayers to continue to apply Ramsay in the ordinary course of organising their tax affairs as they would have prior to the judgment in Royal Bank of Canada.
Kasim Mehmood, Slaughter and May
