223 / 330
g a z e t t e
s e p t e m b e r 1986
than the avoidance of tax. These would therefore be
disregarded and the sale would be treated as a direct
disposal by the company under the new contract and not
under the original contract. Similarly, in
Ingram
-v-
I.R.C.
25
Vinelott J. held that the new approach applied
to arrangements to avoid stamp duty.
(B)
Recent Restrictions on New Approach
(1) ' 'Commercial Purpose''/ Preordained Series''
More recently, several important cases have set some
boundaries on the new approach. In
Craven (Inspector
of Taxes)
-v-
White
26
Peter Gibson J. discussed the
meaning of "preordained" and "composite transac-
tion" and held that a step in a series of transactions
which had a commercial purpose as well as a tax
avoidance purpose would not be treated as a fiscal
nullity. In that case, the taxpayer entered a tax
avoidance arrangement in the expectation that a sale of
shares or merger of two companies would take place.
Negotiations broke down and a sale was subsequently
made to an unconnected third party. Counsel for the
Revenue argued that a series of transactions neverthe-
less existed, because the test was whether a preordained
step was
intended
by the taxpayers to be one step in a
series and not whether it actually was such a step.
Peter Gibson J. looked at the words of Lord Wilber-
force in
Ramsay's
case. Lord Wilberforce said that the
courts were not bound to consider individually each
separate step in a composite transaction intended to be
carried through as a whole
27
:
" . . . this is particularly the case where (as in
Eilbeck
-v-
Rawling)
it is proved that there was an
accepted obligation once a scheme is set in
motion, to carry it through its successive steps. It
may be so where (as in
Ramsay
or in
Black)
Nominees Ltd.
-v-
Nicol (Inspector of Taxes)
there is an
expectation that it will be so carried
through and no likelihood in practice that it will
not."
(Italics added)
The Judge said Lord Wilberforce had referred to two
classes of case where
Ramsay
would apply, namely
contractual and non-contractual arrangements. He
continued
28
:
"It is to be noted that to the non-contractual class
of case Lord Wilberforce applies the description
that it is where there is an expectation that the
series of steps will be carried through once a
scheme is set in motion and there is no likelihood
that it will not. The practical certainty . . . . that
the series of steps will be completed once started is
a feature of the rationale of the
Ramsay
principle. . . . "
The reason for equating contractual with preordained
uncontractual was that there was no distinction between
the two, as in practice both would be carried through to
their intended conclusion. However, this was to be
contrasted with a case when there was a "distinct
£1,000recovered
after
30day
trial
Even these days, a thousand
pounds is a eonsiderable sum of money.
Yet many practices are losing at least this
amount every month through uncharged
disbursements.
The old system of manual logging
of photocopies loses 20-25% of costs
otherwise recoverable with the Copitrak
accounting system, whether you have one
photocopier or fifty.
But don't take our word for it. See
for yourself. Let us install the system on a
month's free trial. No strings. No hidden
charges. Just visit our stand to arrange for
your trial. Then all you have to worry
about is how to spena the money.
Copitrak Data UK Limited, 26 Red Lion Square, London WC1R 4RL Telephone: 01-242 9462
213