Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT-2023-000031 - [2024] UKUT 00168 (TCC)

Fecha: 13-Mar-2024

The Appellant’s argument

The Appellant’s argument

96.

Ms Nathan KC submitted that the FTT erred in concluding that it was bound by Berry v HMRC [2011] STC 1057 given that the approach of Lewison J (as he then was) in Berry was inconsistent with the correct approach to statutory construction explained in UBS.

97.

She contended that the Upper Tribunal was not bound to follow the decision of Lewison J in Berry. She argued that we should not do so as Lewison J made two errors of law. First, he looked outside of the statutory language for the meaning of the term “loss.” Secondly, he failed to give adequate regard to the statutory scheme and did not have before him the extra-statutory materials which establish the purpose of paragraph 14A, Schedule 13, FA 1996.

98.

Ms Nathan KC submitted that in Berry, Lewison J set out the following accurate summary of the law from [31(i)-(vii)]:

“In my judgment:

The Ramsay principle is a general principle of statutory construction (Collector of Stamp Revenue v Arrowtown Assets Ltd (2004) ITLR 454 (§ 35); Barclays Mercantile Business Finance Ltd v Mawson [2005] STC 1 (§ 36)).

ii)

The principle is twofold; and it applies to the interpretation of any statutory provision:

To decide on a purposive construction exactly what transaction will answer to the statutory description; and

To decide whether the transaction in question does so (Barclays Mercantile Business Finance Ltd v Mawson (§ 36)).

iii)

It does not matter in which order these two steps are taken; and it may be that the whole process is an iterative process (Barclays Mercantile Business Finance Ltd v Mawson (§ 32); Astall v HMRC [2010] STC 137 (§ 44)).

iv)

Although the interpreter should assume that a statutory provision has some purpose, the purpose must be found in the words of the statute itself. The court must not infer a purpose without a proper foundation for doing so (Astall v HMRC (§ 44)).

In seeking the purpose of a statutory provision, the interpreter is not confined to a literal interpretation of the words, but must have regard to the context and scheme of the relevant Act as a whole (WT Ramsay Ltd v Commissioners of Inland Revenue (1981) 54 TC 101, 184; Barclays Mercantile Business Finance Ltd v Mawson (§ 29)).

vi)

However, the more comprehensively Parliament sets out the scope of a statutory provision or description, the less room there will be for an appeal to a purpose which is not the literal meaning of the words. (This, I think, is what Arden LJ meant in Astall v HMRC (§ 34). As Lord Hoffmann put it in an article on Tax Avoidance: “It is one thing to give a statute a purposive construction. It is another to rectify the terms of highly prescriptive legislation in order to include provisions which might have been included but are not actually there”: See Mayes v HMRC [2010] STC 1 (§ 30)).

vii)

In looking at particular words that Parliament uses what the interpreter is looking for is the relevant fiscal concept: (MacNiven v Westmoreland Investments Ltd [2001] STC 237 (§§ 48, 49)).”

99.

Nonetheless, Ms Nathan KC respectfully contended that Lewison J then fell into error when he went on to state as follows at [31(viii)]:

“(viii)

Although one cannot classify all concepts a priori as “commercial” or “legal”, it is not an unreasonable generalisation to say thatif Parliament refers to some commercial concept such as a gain or loss it is likely to mean a real gain or a real loss rather than one that is illusory in the sense of not changing the overall economic position of the parties to a transaction: WT Ramsay Ltd v Commissioners of Inland Revenue (1981) 54 TC 101 , 187; Inland Revenue Commissioners v Burmah Oil Co Ltd (1981) 54 TC 200 , 221; Ensign Tankers Ltd v Stokes [1992] 1 AC 655 , 673, 676, 683; MacNiven v Westmoreland Investments Ltd (§§ 5, 32); Barclays Mercantile Business Finance Ltd v Mawson (§ 38).” [Emphasis added]

100.

She argued that in so stating as underlined, Lewison J erred. There is no general canon of statutory construction to that effect. Lewison J impermissibly attributed a presumed meaning to Parliament without reference to the principal means by which Parliament’s intention is discerned: the language of the statute. As the Supreme Court said in UBS at [65] “all depends on the construction of the provision in question.” Lewison J in effect laid down a general rule of interpretation where Parliament has not seen fit to lay down such a rule itself.

101.

Ms Nathan KC submitted that this error then infected Lewison J’s conclusion at [52], construing paragraph 14A, that it “is to be expected that Parliament intended to tax (or relieve) real commercial outcomes.” Lewison J arrived at that conclusion by impermissibly referring to a non-statutory presumption rather than by construing the language of the statute. In so doing, Lewison J acted inconsistently with his own articulation of the Ramsay principles derived from the authorities and set out at Berry [31(iv)] namely:

“(iv)