135:
became worth far more than its original value, and the other far less. The loan that had gained in value was disposed of in such a way that it was intended to be exempt from tax as "debt" (sec. 251 TCGA 1992: Where a person incurs a debt to another, whether in sterling or in some other currency, no chargeable gain shall accrue to that creditor or his personal representative or legatee on a disposal of the debt, except in the case of the debt on a security ), while the loan that had fallen in value was disposed of in such a way that it was intended to be a deductible
130:
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 that it was hoped would be exempt from tax.
276:
particles, these 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.
351:
It would be disingenuous to suggest, and dangerous on the part of those who advise on elaborate tax-avoidance schemes to assume, that Ramsay's case did not mark a significant change in the approach adopted by this House in its judicial role to a pre-ordained series of transaction (whether or not they
317:
that the taxpayer does not need to use his own funds, typically provided by a financial group with only the customer's security, and that by the end of the scheme his financial position is unchanged (other than in providing fees and expenses to the scheme's promoter), so that "in some cases one may
289:
In this case, the Burmah Oil group had suffered a genuine loss on the sale of an investment. However, the loss was not of the right kind to be deductible for tax purposes. Accordingly, the company's accountants and lawyers formulated a plan to "crystalise" that loss into a deductible form. They did
134:
The two assets in question were loans of equal amounts, which had an unusual condition: Ramsay Ltd. was entitled, once, to reduce the rate of interest on one loan, provided that the rate of interest on the other loan increased by the same amount. Ramsay Ltd. exercised this right, such that one loan
234:
His reasoning was that Mr
Rawling had an interest in the Jersey trust, anyway, so there simply had not been any loss on the sale of the interest in the Gibraltar trust. Also, all of the money needed to fund these trusts, and to purchase the interests in them, had been provided by a company called
129:
is an appeal by W. T. Ramsay Ltd., a farming company. In its accounting period ending May 31, 1973, it made a "chargeable gain" for the 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
275:
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 that prevents the taxpayer from supporting any real loss and whose gain is intended not to be taxable. Like the
374:
The driving principle in the Ramsay line of cases continues to involve a general rule of statutory construction and an unblinkered approach to the analysis of the facts. The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the
338:
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 so I
329:
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 the series or combination which may be
352:
include the achievement of a legitimate commercial end) into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax that, in the absence of those particular steps, would have been payable.
361:
More recent cases have tended to move away from a narrow focus on disregarding circular transactions and inserted pre-ordained steps with no commercial purpose. A number of tax counsel have cited the following comments by
94:. The House of Lords decided that where a transaction has pre-arranged artificial steps that serve no commercial purpose other than to save tax, the proper approach is to tax the effect of the transaction as a whole.
139:. Funding for the entire transaction was provided by a finance house, on terms such that the money would inevitably pass round in a circle, and back into their hands again, within a few days, with interest.
298:
in the group. These transactions were made using Burmah Oil's own money, and were therefore quite different from the pre-arranged, marketed "schemes" using borrowed money in the Ramsay and
Eilbeck cases.
142:
The House of Lords rejected the idea that there was any exemption from tax under the "debt on a security" rule. However, that was not the basis of their decision, which was a more far-reaching principle.
211:
On day 4, Mr
Rawling sold his reversionary interest in the Gibraltar trust at its new market value, making a substantial loss since the asset was worth far less than it had been on day 2.
302:
The judges were quite clear that they would have found in favour of Burmah Oil, and against the IRC, had it not been for the decision in the Ramsay case, some months before.
223:
290:
this by entering into a series of (perfectly genuine) inter-group transactions, the overall effect of which was that the loss already incurred became a deductible
235:
Thun Ltd., on terms that it would all be paid back to Thun Ltd. after the transactions had been completed. (Indeed, the court doubted that there had ever been any
370:
HKCFA 46, para 35 with approval as an authoritative statement of the prevailing view of the judiciary on the application of legislation in tax avoidance cases:
314:
that there was a "clear and stated intention that once started each scheme shall proceed through the various steps to the end" whether admitted or implied;
167:
are not "assets" in that sense. The taxpayer in this case, Mr
Rawling, tried to take advantage of that fact by entering into the following transactions:
485:
460:
21:
455:
267:
Lord
Wilberforce described the transactions in the Ramsay and Rawling cases with this colourful (if not necessarily scientifically accurate)
321:
the key ingredient, that "it is candidly, if inevitably, admitted that the whole and only purpose of each scheme was the avoidance of tax".
465:
428:
475:
344:
450:
386:
258:
Note that the facts have been simplified for ease of explanation, and that the actual transaction was rather more complex.
242:
However (as with the Ramsay case above) the core of the decision was not related to the judges' disagreement with the
214:
It was not a coincidence that the loss was a little under £315,000: just enough to cover an unrelated taxable
480:
363:
66:
470:
88:
239:
money, at all: the whole matter appears to have been dealt with by means of paper accounting entries.)
83:
had entered into complex and self-cancelling series of transactions that had generated artificial
424:
160:
98:
91:
310:
In the Ramsay case, Lord
Wilberforce distinguished three ingredients of the schemes involved
393:
122:
47:
W. T. Ramsay Ltd. v. Inland
Revenue Commissioners, Eilbeck (Inspector of Taxes) v. Rawling
343:
The core of the Ramsay
Principle is to be found in the Burmah Oil case in this remark by
29:
444:
208:
On day 3, The trustees of the
Gibraltar trust appointed £315,000 to the Jersey trust.
72:
51:
291:
215:
136:
106:
84:
80:
105:, and is an important restraint on the ability of taxpayers to engage in creative
189:
trust, of the kind in which Mr
Rawling's interest would not be a taxable asset.
295:
246:
of the taxpayer's case. Instead it was based on a more fundamental principle (
230:
I wholly fail to comprehend the contention that the taxpayer sustained a loss.
199:
179:
175:
164:
156:
205:
On day 2, Mr Rawling bought a reversionary interest in the Gibraltar trust.
195:
25:
268:
186:
159:
are "assets" of a kind that can be bought, sold, and be subjected to
222:
The court rejected the idea that there had in fact been any loss.
318:
doubt whether, in any real sense, any money existed at all"; and
121:
The important facts are set out in the following quotation from
102:
32:
423:. London: Financial Training Publications. pp. 267–274.
20:" is the shorthand name given to the decision of the
368:Collector of Stamp Revenue v Arrowtown Assets Ltd
334:He ruled that in the particular facts of Ramsay
79:In summary, companies that had made substantial
372:
349:
336:
327:
273:
228:
127:
194:It was a term of the Gibraltar trust that its
325:Wilberforce summed up the emerging principle
8:
406:
414:
412:
410:
218:Mr Rawling had made in the same year.
7:
421:Tax Raiders: The Rossminster Affair
171:On day 1, two trusts were created:
375:transaction, viewed realistically.
14:
294:on the liquidation of one of the
486:United Kingdom taxation case law
65:Inland Revenue Commissioners v.
461:1982 in United Kingdom case law
251:
97:The decision is not limited to
456:Taxation in the United Kingdom
178:trust, of the kind in which a
163:. Other types of interests in
101:, but applies to all forms of
1:
202:of money to the Jersey trust.
263:"Particles" in a gas chamber
62:, the full name of which is
44:, the full name of which is
155:Some types of interests in
502:
466:1982 in the United Kingdom
387:Duke of Westminster's Case
59:IRC v. Burmah Oil Co. Ltd.
182:would be a taxable asset.
75:is S.T.C. 30, H.L.(Sc.).
476:Lord Wilberforce cases
377:
354:
341:
332:
278:
232:
132:
226:said, quite bluntly:
180:reversionary interest
87:, for the purpose of
451:House of Lords cases
419:Tutt, Nigel (1985).
248:The Ramsay Principle
35:, reported in 1982:
250:) explained under "
67:Burmah Oil Co. Ltd.
149:Eilbeck v. Rawling
283:IRC v. Burmah Oil
99:capital gains tax
92:capital gains tax
24:in two important
493:
435:
434:
416:
394:Furniss v Dawson
123:Lord Wilberforce
28:in the field of
18:Ramsay principle
501:
500:
496:
495:
494:
492:
491:
490:
441:
440:
439:
438:
431:
418:
417:
408:
403:
382:
359:
308:
287:
265:
153:
119:
103:direct taxation
12:
11:
5:
499:
497:
489:
488:
483:
481:Burmah-Castrol
478:
473:
468:
463:
458:
453:
443:
442:
437:
436:
429:
405:
404:
402:
399:
398:
397:
390:
381:
378:
358:
355:
323:
322:
319:
315:
307:
304:
286:
279:
264:
261:
220:
219:
212:
209:
206:
203:
192:
191:
190:
183:
152:
145:
118:
111:
85:capital losses
77:
76:
55:
22:House of Lords
13:
10:
9:
6:
4:
3:
2:
498:
487:
484:
482:
479:
477:
474:
472:
471:Tax avoidance
469:
467:
464:
462:
459:
457:
454:
452:
449:
448:
446:
432:
430:0-906322-76-6
426:
422:
415:
413:
411:
407:
400:
396:
395:
391:
389:
388:
384:
383:
379:
376:
371:
369:
365:
356:
353:
348:
346:
340:
335:
331:
326:
320:
316:
313:
312:
311:
305:
303:
300:
297:
293:
284:
280:
277:
272:
270:
262:
260:
259:
255:
253:
249:
245:
240:
238:
231:
227:
225:
217:
213:
210:
207:
204:
201:
197:
193:
188:
184:
181:
177:
173:
172:
170:
169:
168:
166:
162:
158:
150:
146:
144:
140:
138:
131:
126:
124:
116:
115:Ramsay v. IRC
112:
110:
108:
104:
100:
95:
93:
90:
86:
82:
81:capital gains
74:
70:
69:
68:
61:
60:
56:
54:is A.C. 300.
53:
49:
48:
43:
42:
41:Ramsay v. IRC
38:
37:
36:
34:
31:
27:
23:
19:
420:
392:
385:
373:
367:
360:
357:Developments
350:
345:Lord Diplock
342:
337:
333:
328:
324:
309:
301:
296:subsidiaries
292:capital loss
288:
282:
274:
266:
257:
256:
247:
243:
241:
236:
233:
229:
224:Lord Russell
221:
216:capital gain
200:appointments
154:
148:
141:
137:capital loss
133:
128:
120:
114:
107:tax planning
96:
78:
64:
63:
58:
57:
46:
45:
40:
39:
17:
15:
198:could make
445:Categories
401:References
364:Ribeiro PJ
252:Judgements
71:, and its
50:, and its
339:conclude.
330:regarded.
306:Judgments
254:" below.
176:Gibraltar
380:See also
196:trustees
89:avoiding
73:citation
52:citation
281:Facts (
147:Facts (
113:Facts (
427:
269:simile
244:detail
187:Jersey
165:trusts
157:trusts
26:cases
425:ISBN
237:real
366:in
161:CGT
125::.
33:tax
447::
409:^
347::
271::
185:a
174:a
109:.
30:UK
433:.
285:)
151:)
117:)
16:"
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.