Barnes v Revenue & Customs [2011] UKFTT 95 (TC) (31 January 2011)

Barnes v Revenue & Customs [2011] UKFTT 95 (TC) (31 January 2011)

The Tribunal held that the tax avoidance scheme did not entitle Mr Barnes to the claimed relief and deduction. On a purposive construction of the relevant statutory provisions, the scheme's preordained, circular steps lacked commercial substance and did not fall within the intended scope of the accrued income and manufactured interest rules. The Tribunal found that the statutory reliefs were not available in the circumstances, and the closure notice disallowing the deduction was upheld.

Citation
[2011] UKFTT 95
Parties
Appellant: Mr Nicholas Barnes; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
31 January 2011
Procedural Posture
Income Tax Appeal (first Tier Tribunal, Tax) / Substantive Hearing and Decision on Appeal Against Closure Notice
Outcome
Appeal dismissed
Legal Topics
Income Tax, Tax Avoidance, Accrued Interest Provisions, Manufactured Interest Provisions, Stock Lending, Interpretation of Tax Statutes
Tax Law Income Tax Tax Avoidance Accrued Interest Provisions Manufactured Interest Provisions Stock Lending Interpretation of Tax Statutes

Case Brief

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Parties

Mr Nicholas Barnes

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal (first Tier Tribunal, Tax) / Substantive Hearing and Decision on Appeal Against Closure Notice

Legal Issues

  1. 1 Whether the tax avoidance scheme (Project Corbiere/WhiteBox) entitles the appellant to relief under the accrued interest provisions of Chapter II of Part XVII ICTA 1988 and deduction under the manufactured interest provisions of Schedule 23A ICTA 1988; whether the scheme's steps are effective for tax purposes or should be disregarded as a composite transaction lacking commercial substance.

Ratio Decidendi

The Tribunal held that the tax avoidance scheme did not entitle Mr Barnes to the claimed relief and deduction. On a purposive construction of the relevant statutory provisions, the scheme's preordained, circular steps lacked commercial substance and did not fall within the intended scope of the accrued income and manufactured interest rules. The Tribunal found that the statutory reliefs were not available in the circumstances, and the closure notice disallowing the deduction was upheld.

Court Disposition

Appeal dismissed

Orders

  • The appeal is dismissed. The closure notice issued by HMRC stands. No deduction or relief is allowed in respect of the manufactured interest payment or under the accrued income scheme.