Tax Resolution Update
HMRC Litigation and Settlement Strategy
The Tax Resolution Group is a key component of our Tax
Department. Liesl Fichardt and her colleagues specialise in tax
risk assessment and planning, transaction implementation, and tax
dispute resolution. I am delighted to introduce this first issue of
the Group's "Update".
Since HMRC published their 2007 Litigation and Settlement
Strategy, we have seen them increasingly focus on structured tax
transactions and the use of anti-avoidance rules. That is the area
on which "Update" will principally concentrate.
May I also extend to you a warm welcome to The Tax Resolution
Group's Breakfast Briefing on 29 October 2008, when Sir Stephen
Oliver, QC will discuss the new Tax Tribunal. The new regime will
change the landscape of tax litigation. Details appear below.
Michael Wistow, Head of Tax
Update on HMRC Challenges
Prudential1
- Guidance on "unallowable purpose" deferred -
transaction implementation is key
Prudential - argued in the High Court in July 2008 -
concerned a complex tax structure including two swap transactions
designed to secure a tax advantage under the provisions of Finance
Act 1994. The issue was whether the "swaps" were
"qualifying payments" within the meaning of Sections 151
and 153 of Finance Act 1994.
The case was widely expected to answer some of the many
questions surrounding the "unallowable purpose"
anti-avoidance rule, on which HMRC placed much weight. However,
after a close analysis of the facts, the court decided in favour of
HMRC on purely technical grounds, holding that, as carried into
effect, the transaction, did not meet the statutory requirements
for tax relief - i.e. the "swaps" were not
"qualifying payments".
The court concluded that the nature of the payments implementing
the transaction did not conform with the requirements of the
relevant tax legislation. The court did not consider the purpose of
the transaction and did not find it necessary to decide that the
agreement was a sham. As a result Prudential sets no precedent for
the "unallowable purpose" attack raised by HMRC.
Astall2
In Astall the High Court considered specific
arrangements and whether a security was a "relevant discounted
security" under paragraph 3 of Schedule 13 of the Finance Act
1996. Again, the court closely analysed the facts as found by the
Special Commissioners and held that the Commissioners' decision
finding in favour of HMRC - that the security was not a
"relevant discounted security" - could...
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