Following the collapse of Enron in 2001, Goldman Sachs and Cargill had purchased a company previously known as Teeside Power Ltd. Teesside Power had claimed hundreds of millions of pounds were owed to the plant by other Enron subsidiaries. In a scheem devised by Ernst and Young, Teesside Power set up a Jersey-based company to avoid paying corporation tax on about £200 million by converting the receivables into shares. The Court of Appeal ruled in favour of the tax authorities and considered the scheme abusive tax avoidance covered by UK GAARs. The Court stated that statutory notes, although they are not endorsed by Parliament, are admissible as an aid to construction. The explanatory notes relating to the 2006 amendment to FA 1996 s 85A(1) confirmed that the amendment aimed to make it absolutely clear that the ‘fairly represent’ rule in s 84(1) takes priority over the accounting treatment mandated by s 85A(1). ”GDF EWCA Civ 2075 (05 October 2018)”] ... Read more

Major US MNE’s with regional Headquarters in Ireland for European business activities. The corporation tax rate in Ireland is only 12.5%. However to further sweeten the deal for MNE’s, Ireland has been known to offer special tax deals to MNE’s resulting in much lower effective tax rates. Ireland provides MNEs with both low tax centers for European activities and conduit holding companies serving as hubs for transferring profits and capital to low tax jurisdictions such as Cyprus and Bermuda. Especially MNEs within the IT sector have been known to use a combination of subsidiaries in Ireland, Luxembourg, the Netherlands, and Bermuda to reduce their taxes (“Double Duch Irish sandwich”). Ireland has been involved in investigations concerning corporate taxes in both the EU and US. An investigation of Apple discovered that two of the company’s Irish subsidiaries were not classified as tax residents in the U.S. nor Ireland, despite being incorporated in Ireland. Ireland offers low tax, many tax treaties, low ... Read more

In this case the UK Supreme Court addressed the Ramsay approach, when it considered tax avoidance schemes which involved composite transactions designed to avoid payment of income tax on bankers’ bonuses. According to the Supreme Court the Ramsay case did not develop a special rule for tax avoidance schemes; instead it extended to tax cases the purposive approach to statutory construction which was orthodox in other areas of the law. The Ramsay principle established that the analysis of the facts depended upon the purposive construction of the statute. While this was not a new special rule for tax avoidance cases, the approach had proved particularly important in such cases. Excerpts from the Supreme Court Judgement “The Ramsay approach 61. As the House of Lords explained in Barclays Mercantile Business Finance Ltd v Mawson, in a single opinion of the Appellate Committee delivered by Lord Nicholls, the modern approach to statutory construction is to have regard to the purpose of a ... Read more