SHIP sunk without trace

25 July 2007 / David Whiscombe

Issue: 4118 / Categories: Comment & Analysis , Capital Gains , Losses

And with much loss of tax relief: DAVID WHISCOMBE reports the Special Commissioner's decision in Drummond.

DRUMMOND CONCERNS AN example of the well-known second-hand insurance policy (hence 'SHIP') capital gains tax avoidance schemes. Purists may point out that such schemes involved a life assurance rather than insurance contract but as often happens accuracy is sacrificed to a neat acronym. The strategy has long since been closed by amendments wrought by FA 2003 (which introduced a re-written TCGA 1992 s 210) but Drummond (SpC 617) is of interest for its general approach to tax avoidance strategies.

An unexpected win?

Before passing to the decision it should be noted that this may have been a case that HMRC were not expecting to win. When the 2003 Budget announced legislation to counter the SHIP strategy the usual formulae of 'to put the position beyond doubt' or 'to clarify the application of the law' were conspicuously absent: instead the change...

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