UT (Tax & Chancery) UT/2022/0092 - [2024] UKUT 00373 (TCC)

Ms Shaw submitted that even if tax avoidance was a purpose of the arrangements, it was not a main purpose. By analogy with the loan relationships code, the word “main” should be taken to mean “important” (Travel Document Service v HMRC [2018] STC 723 (“TDS”) at [48]). In TDS at [46] Newey LJ described the hoped-for gain as large both in absolute terms and relative to the apparent value of TDS, and agreed that the inescapable inference was that securing the advantage had become a main purpose of holding the shares. At [48] Newey LJ rejected the submission that “main” means “more than trivial”. It has a connotation of importance.

Ms Shaw submitted that the word “main” bears a sense of comparison. Where there is more than one purpose, assessing whether one purpose is a main purpose is a comparative exercise – the importance of the tax purpose must be assessed by reference to and in relation to the commercial purposes of the arrangements.

At [47], the FTT acknowledged that it was unable to conclude that the tax purpose was more important than the commercial purposes and whilst it did conclude that the group attached considerable importance to the tax advantage ([43]), that the anticipated tax advantage was a very significant sum ([45]) and that it was very important to the group ([87(3)]), it did so without reference to or comparison with the commercial purposes.

In circumstances where, absent the commercial purposes, the arrangements would not have been entered into at all (as found by the FTT at [46]), Ms Shaw submitted that it cannot be said that any tax purpose was a main purpose of the arrangements because the tax purpose cannot be said to be important if it is not a sufficient reason for entering into the arrangements.