The Upper Tax Tribunal has dealt another blow to HMRC in its battle against tax avoidance schemes, by overturning the judgement of the First-tier Tribunal in the Tower Radio/Total Property Support Services case. The FTT had previously decided that the avoidance schemes did not succeed, applying the Ramsey principle of statutory interpretation which allows certain steps in a tax avoidance scheme that have no commercial purpose to be ignored. However, the UTT decided that the FTT had taken the Ramsey principle too far, and that it was not entitled to ignore specific detailed provisions of the tax legislation that the avoidance schemes had taken advantage of.
The decision is not particularly surprising in light of the Court of Appeal’s decision in the UBS/DB case which concerned a similar avoidance scheme, though this ruling has been appealed to the Supreme Court. These cases are mainly of historical interest as far as the taxation of employment related securities is concerned, due to changes in the legislation that have closed down most avoidance opportunities. However, the changing views of the courts as to how the Ramsey principle should be applied to avoidance schemes is still relevant, notwithstanding the introduction of the General Anti-Abuse Rule (GAAR). We await with interest the Supreme Court’s decision in the UBS/DB case.
- The UTT judgement: Tower Radio Limited; Total Property Support Services Limited v The Commissioners for Her Majesty’s Revenue and Customs  UKUT 0060 (TCC)
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