Court of Appeal gives guidance on the scope and extent of Ramsay

In The Trustees of the Morrison 2002 Maintenance Trust and Others v HMRC [2019] EWCA Civ 93 the Court of Appeal considered the effectiveness of tax planning that was designed to avoid the capital gains tax that would otherwise have arisen on the disposal of certain shares by the trustees of Scottish Trusts to the market.  The planning involved the sale of the shares to a third party (a newly created Irish Trust) who would then sell the shares to the market.  Following the sale to the Irish Trust, the Irish Trustees did not sell the shares directly to the market but did so via a sale to Merrill Lynch who then sold to the market.

The Trustees, relying on the speeches of the majority in Craven v White, argued that “a single composite transaction” of the kind required by the Ramsay approach could not exist in the absence of “arrangements” for the onward sale at the time of the sale by the Scottish Trustees to the Irish Trustees.  That argument was rejected by the Court of Appeal which held that there was no strict requirement for “arrangements” for the final sale to have been made by the time of the first transaction where the asset in question can be disposed of quickly without advance preparation.  In the instant cases, where the asset comprised a shareholding in a quoted company, nothing of any significance needed to be done by the time of the first disposal to the Irish Trust for a rapid onward sale to the market to be achieved. Further, the Court held that the fact that the shares were sold to brokers (Merrill Lynch) rather than to the market by brokers as originally envisaged did not render the Ramsay approach inapplicable.

Akash Nawbatt QC and Kate Balmer acted for HMRC.

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