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Ian Mills reviews the importance of a recent High Court decision on the existence of a tax avoidance purpose in a transaction.
KEY POINTS
- Determining whether a share exchange is for bona fide purposes.
- When is a tax avoidance purpose present?
- The effect of the difference between avoidance and mitigation.
- Planning ahead can prove detrimental.
- The relationship between avoidance deferral and escaping a tax liability.
THE HIGH COURT decision in Snell v HMRC [2006] EWHC 3350 focused on the tax treatment of the sale of shares in a company in exchange for loan notes which were redeemed after the vendor had ceased to be resident. The basic details were contained in the news item 'Share exchange' (Taxation 8 February 2007 page 158) and the case led to consideration of three important tax issues in the context of anti-avoidance legislation.
- Is the exchange carried out for a 'bona-fide commercial reason'? ...
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