Revenue & Customs v Mayes

Parties

Procedural Posture

Civil Appeal (tax) / Second Appeal From High Court (chancery Division) to Court of Appeal

Legal Issues

1. 1 Whether pre-ordained, self-cancelling, artificial, tax-motivated steps in SHIPS 2 are to be disregarded for fiscal purposes under the Taxes Management Act 1970 and ICTA 1988
2. 2 Whether the payment at Step 3 was a premium and the repayment at Step 4 was a partial surrender for the purposes of corresponding deficiency relief under s.549 ICTA
3. 3 Whether the consideration paid by Mr Mayes for the assignment of life assurance policies is deductible for CGT purposes under s.38 TCGA

Ratio Decidendi

The Court held that the ICTA provisions must be construed purposively, but the statutory requirements for corresponding deficiency relief are satisfied by the actual legal events of premium payment and partial surrender, even if pre-ordained and tax-motivated. The court cannot disregard such steps solely because they are self-cancelling and inserted for tax avoidance. The appeal by HMRC was dismissed. On the CGT issue, the ascertainment of the amount of consideration paid wholly and exclusively for the acquisition of the Bonds is a question of fact, and the matter was properly remitted to the First-tier Tribunal.

Court Disposition

Both the appeal and cross-appeal dismissed.

Orders

• HMRC's appeal on corresponding deficiency relief dismissed; Mr Mayes entitled to relief.
• Mr Mayes' appeal on CGT issue dismissed; matter remitted to First-tier Tribunal to determine the amount of consideration paid wholly and exclusively for the acquisition of the Bonds.