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The taxpayer claimed corresponding deficiency relief from income tax via a tax avoidance scheme known as SHIPS 2. It involved life insurance policies being packaged into bonds and sold to a non-resident company.
They were then part-surrendered to create a chargeable event under TA 1988 s 540(1); this was followed by a full surrender by the investor who could then claim the relief. The scheme comprised seven steps some of which were self-cancelling.
HMRC denied that relief was due saying steps three and four had no commercial reality.
The taxpayer appealed. The Special Commissioners agreed with HMRC but the High Court allowed the taxpayer’s subsequent appeal.
HMRC appealed.
The Court of Appeal said the High Court had applied the approach in Ramsay which was clarified correctly...
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