The Gazette 1986

g a z e t t e

s e p t e m b e r 1986

possibility that a planned series may. not be completed as

planned" which was not the equivalent of either a

contractual

agreement

non-contractual

arrangement.

In the case before him, Peter Gibson J. therefore

concluded that when the avoidance arrangement was

entered into, there was a possibility that the sale would

not take place. This was because when the share

exchange took place, there was a possibility that the sale

of the shares would not take place because there was no

agreement for sale at that time. The Judge further

concluded that the arrangement was not a step that

could be disregarded in any event as it was not

wholly

for tax avoidance purposes in that at the time the

arrangement was entered into the intermediary holding

company was to serve as a vehicle for a merger with the

original prospective purchasers, and, therefore, had an

independent commercial purpose. The Court could not

abuse the benefit of hindsight and had to look at the

circumstances at the time the step was made. The fact

that the merger did not take place and that the step did

in fact have the sole result of avoiding tax had to be

disregarded. He concluded

"It is one thing for the Court to treat as a fiscal

nullity a purely artificial step which will

inexorably be followed by one or more others so

as to achieve the desired end result.

It.is

quite

another for the Court to treat as a fiscal nullity a

step which had a commercial purpose in addition

to tax avoidance and which in reality at the time it

was taken might not have been followed by the

other steps."

The decision in

Craven

-v-

White

was confirmed in

the subsequent case of

I.R.C.

-v-

Bowater Property

Developments Ltd?

In that case the taxpayer company

entered a tax avoidance arrangement prior to the sale of

land to an unconnected purchaser. Negotiations broke

down but were resumed and a sale took place subse-

quently at a higher price and on different terms. The

Revenue argued that the transaction should be treated

as a direct sale under the

Furniss

principle and

contended that when a step was taken by a taxpayer

with a view to avoiding tax in a certain event, and that

event occurred, then what mattered was the expectation

or intention of the taxpayer at the time the step was

taken. Warner J. did not agree and held that the

transactions were not prearranged or pre-ordained.

Following-the words of Lord Wilberforce in

Ramsay,

Lord Brightman in

Furniss

and Peter Gibson J. in

Craven

-v-

White,

he concluded that it would not be said

that there was " no likelihood in practice" that the

second step would not follow the first. The second

transaction was therefore an independent transaction

" . . . as Lord Brightman's words show, and

indeed as the whole tenor of the authorities shows,

a single composite transaction, in this context

means one, all the steps in which have been pre-

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