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

The principles that I derive from Berry are therefore as follows:

We agree. In Berry at [51]-[52] Lewison J carried out the first of the two interpretative stages referred to earlier (Berry at [31](ii)(a)). What is required is the ascertainment of the purpose of the key legislative provision: paragraph 14A of Schedule 13.

What the UT in Berry held is that the purpose of paragraph 14A is to be derived from paragraph 14A(1), namely that a person who sustains a loss from a discount on a strip should be entitled to relief from income tax for that loss, with “loss” in this context not being “notional” but “real” – it should reflect “real commercial outcomes” (Berry at [52]; Andrew at [83(2)-(3)]; Pitt at [119(6)]). That the “loss” must be “real” is not surprising. As observed by the Supreme Court in UBS itself at [64] (citing Barclays at [34], in turn citing Ramsay at page 326D): “tax is generally imposed by reference to economic activities or transactions which exist, as Lord Wilberforce said, ‘in the real world’”.

Ms Nathan KC also suggested that Berry was wrongly decided because Lewison J did not receive argument on the legislative history of the FA 1996 or have sight of the extra statutory material upon which she relied before the FTT and us (which forms part of Ground 4). However, it is notable that despite the number of pages of legislative history and extra-statutory material in the Appellant’s presentation before the FTT and us, there is no passage within the material the Appellant relies upon which states or implies that the concept of “loss” in paragraph 14A denotes an artificial loss devoid of real world outcome. Had such a proposition been part of Parliament’s intent, then this much would have been clear at some point in the legislative process. But it was not. An obvious explanation for such absence is that the Appellant’s interpretation was not part of Parliament’s intent.

In summary, Ground 2 should be dismissed. No sensible criticism of Lewison J’s approach in Berry is identified by the Appellant. Berry is not inconsistent with prior or subsequent case law, and was, we respectfully say, correctly decided. Berry is not undermined by the external materials on which Ms Nathan KC seeks to rely.

As Mr Davey KC submitted, there is nothing to suggest that Lewison J erred in his approach to construing the legislation in Berry, whether by the supposed importation of an illusory canon of statutory construction at [31(viii)] or otherwise. In as much as the Appellant’s complaint goes as far as the proposition that Lewison J in Berry should have interpreted the legislation before him literally rather than purposively then we have already explained why this should be rejected. It is not what is prescribed in UBS or BMBF or Rossendale or any other authority. We have accepted the purposive interpretation of paragraph 14(3)(b) in rejecting Ground 3.

We dismiss Ground 2. The FTT made no error of law.