Deficiency relief

In another case concerning second hand insurance policies or bonds (see Smith SpC 725) a taxpayer claimed deficiency relief under TA 1988 s 549 in respect of surrenders of the bonds.

HMRC refused the claim on the basis that the transactions comprised in reality a series of pre-ordained steps carried out to avoid tax.

Looking at the facts the Special Commissioner said the reason why the funds were paid into and then encashed from the bonds was to activate the benefit of s 549(1).

That happened if the steps could be regarded as causing a loss related to the value of the bonds.

Quoting from Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46 the commissioner said:

‘The ultimate question is whether the relevant statutory provisions construed purposively were intended to apply to the transaction viewed realistically.’

In this...