Astall v. HMRC [2008]. This latest decision of the High Court illustrates the approach taken to transactions entered into for tax avoidance purposes. The facts of the case concern actions which had no commercial purpose but, instead, were there in order to achieve a certain tax treatment.

 

In 2002 the tax payers entered into a tax avoidance scheme which was relatively common at the time and relied upon securities constituting “relevant discounted security” for the purpose of schedule 13 to the Finance Act 1996 in order to create tax losses. When the tax payers claimed a loss for the tax year 2001/2 HMRC rejected the claim because they were not relevant discounted securities. The ruling was upheld by the High Court which, in effect, ruled that artificial steps had been inserted into the structure in order to achieve a certain tax treatment.

 

UK tax legislation includes a range of anti-avoidance provisions and the decisions of the special commissioners and High Court show an increasing willingness to ensure that artificial transactions are struck down.