Tax Avoidance: Causes and Solutions - Scholarly Commons Home

probably are not identical as to substance. Even so, they may be sufficiently similar to
warrant identical tax treatment. . . .
The foregoing judicial principles and statutory provisions, which often overlap in practice,
are useful deterrents to tax-avoidance schemes of varying scope and ingenuity. Forcing
transactions heavily freighted with tax motives to withstand judicial analysis in the context
of these broad principles and provisions, vague and uncertain in application though they
may be, is more salutary than uncompromising literalism in applying the statutory system
for taxing corporations and shareholders”.
These doctrines are closely related and work well in used by the American courts to fight
with commercial realities in the tax arena
5.1.2 United Kingdom
Initially United Kingdom lacked a judicial anti-avoidance doctrine. The United Kingdom
has neither a statute nor an established legal principle to counter tax avoidance in general. 93
Traditionally the courts in the United Kingdom have followed the Duke of Westminster
principle (IRC v Duke of Westminster 94 ) and adopted a form approach in tax cases. They
have upheld a taxpayer’s arrangements even if the purpose or object of those arrangements
is to avoid tax. However, in 1981, W.T. Ramsay Ltd. v. Internal Revenue Commissioner 95
was decided. This case is considered to be the starting point for the development of a “new
approach” to tax avoidance schemes. In this case, the House of Lords struck down a taxplanning
device on the basis that it was entitled to look at the overall result of several
transactions and need not giving tax effect to every single transaction. As Lord Fraser of
Tullybelton comments later 96 :
“[T]he fiscal consequences of a preordained series of transactions, intended to operate as
such, are generally to be ascertained by considering the result of the series as a whole, and
not by dissecting the scheme and considering each individual transaction separately.”
93
Revenue HM and A Customs, General Anti-Avoidance Rule for Direct Taxes: Consultative Document,
(1998).
94
[1936] AC.
95
[1981] STC 174.
96
Furniss v Dawson, [1984] 1 All E.R. 530, 532.
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