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The BEPS effect - Has Lord Tomlin’s famous 1936 dictum become obsolete?

Tuesday, 12 September 2017   (0 Comments)
Posted by: Author: Candice Gibson
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Author: Candice Gibson (CDH)

The last two centuries have seen courts handing down judgments wherein the House of Lords and/or the judiciary have been required to interpret the concept of tax avoidance taking into account the specific facts of each case, as well as the interpretation of what constitutes lawful tax structuring, and what does not.

A popular dictum regarding the structuring of a taxpayer’s affairs is that which Lord Tomlin made in 1936 in the well-known case of IRC v Duke of Westminster [1936] A.C 1; 19 TC 490 at 520, wherein he stated that:

Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them as to secure this result, then, however unappreciative the Commissioner of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. 

The qualification “if he can” is a significant factor which depends on the circumstances of each case. In some instances, a taxpayer may attempt to remain outside a certain charging provision of legislation, and in others he may wish to bring himself within the ambit of a statutory provision with the aim of obtaining a tax benefit. It may also occur that although the intention of the taxpayer may be to remain outside a charging provision, he may bring himself within a charging provision of statutory legislation, which subsequently results in a tax liability.

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