On 4 August, the Court of Appeal handed down its judgment in Chappell v HMRC [2016] EWCA Civ 809, finding in favour of HMRC.
The taxpayer had appealed against an amendment to his self-assessment tax return by HMRC, which effectively disallowed a deduction from his total income. Mr. Chappell’s entitlement to make the deduction depended upon two payments which he made to a company as manufactured overseas dividends. HMRC’s case, based on Ramsay principles, was that the payments were not deductible because they had been made as part of a tax avoidance scheme. The scheme in question had been implemented by 305 high net worth individuals.
In line with the FTT and UT, the Court of Appeal held that, construing the statutory provisions purposively, they were intended to benefit the parties to real-world, commercial transactions involving the lending of marketable securities and not to transactions which lacked those characteristics and whose only purpose was to obtain tax relief. Accordingly, the relief was denied.
