InThe Trustees of the Morrison 2002 Maintenance Trust and others v HMRC[2016] UKFTT 250 (13 April 2016), the FTT found that a scheme for the avoidance of CGT on the disposal of shareholdings did not work.
The appeals all concerned a tax avoidance scheme to sell Scottish trust shareholdings in AWG plc without triggering CGT. The scheme involved: the setting up of Irish trusts; the exercise of put options; the purchase and sale of the shareholdings by the Irish trusts; and the replacement of these trustees with the original trustees under the Scottish trusts and the consequent repatriation of these trusts. The issue was whether the scheme should be treated as a single composite transaction for the disposal of the Scottish trust shareholdings. Applying the Ramsay doctrine, the question was therefore whether there had been an expectation that the scheme would be carried through in successive steps, and no likelihood in practice that it would not.
The FTT noted that the tax avoidance case law seemed to leave a grey area where the position was to an extent uncertain but not wholly uncertain, as the final decision had been set up so as to rest with a third party that was likely, if not almost bound, to follow the taxpayer’s wishes. The FTT accepted that there had been, at least in theory, a risk that the Irish trustees would take a different view from the Scottish trustees. However, in reality, there had been no practical likelihood of them doing so. The reality had been the sale of the AWG shares in the market by the Scottish trustees and TCGA 1992 was intended to apply to such disposals.
Why it matters: The FTT observed: ‘The correct approach is to apply common sense and experience, probe what appears on the surface, and identify the underlying substance of facts, which paint the true overall picture, when one stands back and assesses what in the real world, whether in a business or family context, has occurred.’ It was clear to the FTT that it had become increasingly obvious, as the scheme had progressed, that it would be carried out as planned.
Also reported this week:
HMRC v N Trigg QCBs and redemption in a currency other than sterling
InThe Trustees of the Morrison 2002 Maintenance Trust and others v HMRC[2016] UKFTT 250 (13 April 2016), the FTT found that a scheme for the avoidance of CGT on the disposal of shareholdings did not work.
The appeals all concerned a tax avoidance scheme to sell Scottish trust shareholdings in AWG plc without triggering CGT. The scheme involved: the setting up of Irish trusts; the exercise of put options; the purchase and sale of the shareholdings by the Irish trusts; and the replacement of these trustees with the original trustees under the Scottish trusts and the consequent repatriation of these trusts. The issue was whether the scheme should be treated as a single composite transaction for the disposal of the Scottish trust shareholdings. Applying the Ramsay doctrine, the question was therefore whether there had been an expectation that the scheme would be carried through in successive steps, and no likelihood in practice that it would not.
The FTT noted that the tax avoidance case law seemed to leave a grey area where the position was to an extent uncertain but not wholly uncertain, as the final decision had been set up so as to rest with a third party that was likely, if not almost bound, to follow the taxpayer’s wishes. The FTT accepted that there had been, at least in theory, a risk that the Irish trustees would take a different view from the Scottish trustees. However, in reality, there had been no practical likelihood of them doing so. The reality had been the sale of the AWG shares in the market by the Scottish trustees and TCGA 1992 was intended to apply to such disposals.
Why it matters: The FTT observed: ‘The correct approach is to apply common sense and experience, probe what appears on the surface, and identify the underlying substance of facts, which paint the true overall picture, when one stands back and assesses what in the real world, whether in a business or family context, has occurred.’ It was clear to the FTT that it had become increasingly obvious, as the scheme had progressed, that it would be carried out as planned.
Also reported this week:
HMRC v N Trigg QCBs and redemption in a currency other than sterling
