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Artificial transactions

18 August 2014
Issue: 4465 / Categories: Tax cases , Avoidance

Chappell v CRC, Upper Tribunal (Tax and Chancery Chamber)

The taxpayer claimed a deduction of £303 123 in his 2005/06 return in respect of two payments made in relation to loan notes as part of a marketed tax avoidance scheme. He said they were manufactured overseas dividends under TA 1988 sch 23A para 4(1) and annual payments under s 349(1).

HMRC rejected the claim and amended his document bringing the sum into charge.

The First-tier Tribunal dismissed the taxpayer’s appeal by accepting the Revenue’s contention that the Ramsay principle applied and that the payments did not fall within s 349(1) as a result.

The taxpayer appealed.

The Upper Tribunal judge said it was clear the overall effect of the transactions had no commercial purpose and had been carried out solely to avoid tax.

He added “All the transactions were organised in advance and consisted of movements of funds in a circle with the payments...

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