Tax Avoidance – the lawful avoidance or reduction of tax by arranging one’s affairs in order to minimise the amount of tax payable



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Tax Avoidance – the lawful avoidance or reduction of tax by arranging one’s affairs in order to minimise the amount of tax payable

  • Tax Avoidance – the lawful avoidance or reduction of tax by arranging one’s affairs in order to minimise the amount of tax payable

  • Aggressive Tax Avoidance – the lawful exploitation of tax loopholes in order to minimise the amount of tax payable

  • Tax Evasion – the unlawful and potentially criminal evasion of payment of tax that is legally due. This may involve lying or the criminal offence of fraud by false representation under the Fraud Act 2006 ss1-2



The Westminster Principle

  • The Westminster Principle

  • Inland Revenue Commissioners V Duke of Westminster 1936 (H. of Lords)

  • Payments to domestic employees by deed of covenant that amounted to remuneration

  • House of Lords refused to disregard the character of the deeds merely because the same result could be brought about in another manner

  • Principle applies to any form of direct taxation



Lord Tomlin “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be . If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of the Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”

  • Lord Tomlin “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be . If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of the Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”

  • Lord Atkin “It has to be recognised that the subject whether poor and humble or wealthy and noble has the legal right to dispose of his capital and income as to attract upon himself the least amount of tax”

  • BUT this case only involved a single avoidance step



The Ramsay Principle

  • The Ramsay Principle

  • W.T. Ramsay Ltd v Inland Revenue Commissioners 1982 (H. of Lords)

  • Company made a large capital gain and entered into a series of self cancelling transactions to generate an artificial capital loss and avoid CGT

  • Where a transaction has pre-arranged artificial steps which serve no commercial purpose other than to save tax, then the proper approach is to tax the effect of the transaction as a whole – referred to as the Ramsay Principle

  • BUT it is limited to a series of self cancelling financial steps



Furniss (Inspector of Taxes) v Dawson D.E.R., Furniss v Dawson G.E., Murdoch v Dawson R.S. 1984 (H. of Lords)

  • Furniss (Inspector of Taxes) v Dawson D.E.R., Furniss v Dawson G.E., Murdoch v Dawson R.S. 1984 (H. of Lords)

  • Selling family company shares – a pre-arranged plan to exchange shares for shares in a newly formed investment company that immediately sold the family shares at an agreed price.

  • CGT exemption applies to company amalgamation and there was no gain or loss by investment company

  • Steps inserted in a preordained series of transactions with no commercial purpose other than tax avoidance should be disregarded for tax purposes, notwithstanding that the inserted step had a business effect

  • Significant extension to Ramsay Principle

  • Now applies to a linear series of financial transactions



John Laing & Son Ltd v Kingswood Area Assessment Committee 1949 (Court of Appeal)

  • John Laing & Son Ltd v Kingswood Area Assessment Committee 1949 (Court of Appeal)

  • London County Council v Wilkins 1956 (House of Lords)

  • Four elements of occupation

  • 1. it must be actual

  • 2. it must be exclusive to the occupier

  • 3. it must be of some benefit to the occupier

  • 4. it must not be for too transient a period

  • SI 2008/386 reg. 5 prescribes that no further rate free period applies if occupation is less than 6 weeks



Rateable occupation is a question of fact

  • Rateable occupation is a question of fact

  • Further periods of relief are allowed

  • There is nothing in the regulations that prevents a ratepayer from repeatedly occupying for 6 week periods to claim repeated empty periods

  • Key test is probably beneficial occupation

  • My question “Ignoring the empty rate saving, would the ratepayer be prepared to pay a rent to obtain that benefit from the occupation?”



There is no “de minimis” rule in the legislation

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