Jurisdiction(s):
United Kingdom

Court of Appeal (England and Wales) applies Ramsay to ‘Aikido’ dividend extraction; distribution ‘in respect of shares’ taxed on shareholders; settlements code rejected (Clipperton v HMRC)

Published on: 19 March 2024

Published by a LexisNexis Private Client expert

Legal News

Article summary

Clipperton and another v Revenue and Customs Commissioners [2024] EWCA Civ 180

What are the practical implications of this case?

This ruling underscores the need for taxpayers and advisers to proceed carefully when presented with avoidance arrangements touting tax savings achieved by a chain of numerous, apparently contrived, steps. The Court of Appeal also distils how the Ramsay principle is to be deployed. It operates in two stages: first, one must adopt a purposive reading of the statutory provisions that bear on the facts; second, one asks whether the facts (here, the distributions) fall within that statutory purpose. The judgment also sheds light on the court’s treatment of the Khan decision (Khan v HMRC [2021] EWCA Civ 624). Although there are parallels with the present scenario, the outcome there was different. In Khan, the existence of a distribution was accepted; the real issue was whether Mr Khan had actually received a distribution, or had an entitlement to it. That framed a different enquiry, calling for a separate Ramsay analysis, and so Khan did not determine the result in this appeal. Accordingly, heightened scrutiny of such planning is warranted.

What was the background?

The CA examined an appeal from the Upper...

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