© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Anti-avoidance rules​​
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- Wide rather than narrow interpretation
"[40] In addition to these authorities, the Tribunal raised the older authorities which suggested (long before purposive interpretation had become the norm) that anti-avoidance provisions should be given a wide interpretation. In Greenberg v CIR, [1979] AC 109, Lord Reid said (at p137e):
"We seem to have travelled a long way from the general and salutary rule that the subject is not to be taxed except by plain words. But I must recognise that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes which are constantly being devised to evade taxation. Parliament is very properly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done, and introduce legislation of a more sweeping character which will put the ordinary well-intentioned person at much greater risk than is created by a wide interpretation of such provisions as those which we are now considering."
[41] Perhaps presciently, he later commented (at p138e):
"I sometimes suspect that our normal meticulous methods of statutory construction tend to lead us astray by concentrating too much on verbal niceties and paying too little attention to the provisions read as a whole."
[42] Lord Wilberforce elaborated on this approach in IRC v Joiner, [1975] 1 WLR 1701 at p1705g:
"On the enactment of the original s 28 of the Finance Act 1960 it was possible to contend, and it was contended, that this section (and its associated sections) was directed against a particular type of tax avoidance known generally under such descriptions as dividend-stripping, asset-stripping and bond-washing, and that the sections and particular expressions used in them, amongst others 'transactions in securities', should be interpreted in the light of this supposed purpose. But this line of argument became unmaintainable after the decisions of this House in Inland Revenue Comrs v Parker' and Greenberg v Inland Revenue Comrs. It is clear that all the members of this House who decided those cases were of opinion that a wide interpretation must be given to the sections and to the expressions used in them. More than this, it appeared from the opinion of Lord Reid in Greenberg v Inland Revenue Comrs that the sections called for a different method of interpretation from that traditionally used in taxing Acts. For whereas it is generally the rule that clear words are required to impose a tax, so that the taxpayer has the benefit of doubts or ambiguities, Lord Reid made it clear that the scheme of the sections, introducing as they did a wide and general attack on tax avoidance, required that expressions which might otherwise have been cut down in the interest of precision were to be given the wide meaning evidently intended, even though they led to a conclusion short of which judges would normally desire to stop."
[43] More recent cases appear to recognise the continued validity of this approach to the interpretation of anti-avoidance provisions as a free-standing principle, notwithstanding the more general ascendancy of purposive interpretation, which might be thought to have subsumed that approach or otherwise rendered it otiose; see the comments of Lord Doherty in the Inner House of the Court of Session in Moulsdale v HMRC, [2021] CSIH 29 at [54], where he referred to a comment of Lord Hoffmann in Newnham College Cambridge v HMRC, [2008] UKHL 23 at [15] (although Lord Hoffmann seems simply to be reciting an HMRC submission to this effect without commenting on it one way or another), and the comments of the Upper Tribunal in HMRC v Sehgal, [2024] UKUT 74 (TCC) at [60]." (Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
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- Difficult to see why Parliament would intend person engaging in tax avoidance to be better off in any way
"[45] Where section 730G applies "the relevant company is not entitled to deduct from the relevant profits any amount in respect of the relevant carried-forward losses." These words (in particular those we have underlined) lead us to agree with Mr Fell that Parliament's intention here is that, where section 730G applies, the profits which result from the tax arrangements should not be sheltered by carried forward losses to any extent at all. Put another, perhaps broader and more colloquial, way, Parliament's intention would seem to be that any company participating in an arrangement within section 730G should not be any better off as a result of participating in that arrangement. As well as being consistent with the words in section 730G, such an interpretation reflects a purposive approach to the construction of the provision. It is hard to see why Parliament would want a company which engaged in arrangements within the scope of section 730G to be able to improve its position in any way at all." (Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
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- Anti-avoidance legislation sometimes covers a wider area than necessary to achieve its object
“We were pressed in the course of the hearing with an elaborate argument…based on examples which, it is said, demonstrate that, as a matter of policy, it could not have been the intention of the legislature that s 286(7) TCGA 1992…should … have any independent application. I hope it will not be thought discourteous—or lacking in respect to the ingenuity with which that argument was formulated and advanced—if I do no more than draw attention to the observation of Morritt LJ, when faced with a similar argument in Steele v EVC [1996] STC 785 at 796). He pointed out that the fact that the Revenue's construction of s 839(7) ICTA 1988 might have unforeseen and unwelcome consequences—in that case, the denial of consortium relief made available by s 402 ICTA 1988 by the operation of s 410(2)(iii) in just those circumstances in which it was to be presumed that Parliament intended it to be available—was no reason for not construing s 839(7) ICTA 1988 in accordance with its terms. In my view the effect of s 286(7) TCGA 1992, in relation to the enquiry required under s 167(2)(b), is clear. I am not persuaded that the Court should refuse to give to the section the effect which, as a matter of construction, it was plainly intended to have in that context on the basis that, in other contexts, the section might be found to have unforeseen or unwelcome consequences.” (Foulser v. MacDougall [2007] EWCA Civ 8, §64, Chadwick LJ).
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“But he also observed, in my view rightly, that s 410 was an anti-avoidance provision which like many other such provisions sometimes covers a wider area than that strictly necessary to achieve its object.” (Steele (Inspector of Taxes) v EVC International NV (formerly European Vinyls Corp (Holdings) BV) [1996] STC 785 at 796, Morritt LJ)
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