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

There is no “de minimis” rule in the legislation
Wirral BC v Lane 1979
Empty House undergoing building works - No overnight stays
Most goods removed but use of telephone
Cumming-Bruce LJ “the magistrates …….. decided to apply the maxim de minimis non curat lex to these valuable chattels.”
“on the facts found by the magistrates, they could have very well come to the opposite conclusion”
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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

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 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

There is no “de minimis” rule in the legislation

Wirral BC v Lane 1979

Empty House undergoing building works - No overnight stays

Most goods removed but use of telephone

Cumming-Bruce LJ “the magistrates …….. decided to apply the maxim de minimis non curat lex to these valuable chattels.”

“on the facts found by the magistrates, they could have very well come to the opposite conclusion”