Jurisdiction(s):
United Kingdom

UKUT confirms TIS purpose test turns on subjective intention; inevitable income tax effects of EIS share buybacks insufficient (Osmond and Allen v HMRC)

Published on: 02 July 2025

Published by a LexisNexis Tax expert

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Article summary

Osmond and Allen v HMRC [2025] UKUT 183 (TCC) What are the practical implications of this case?

The UT’s ruling reinforces the separation between a transaction’s inevitable outcomes and its underlying objective, aligning with advisers’ long‑held view that the TIS rules were never engaged where a transaction principally sought to mitigate capital gains tax (CGT), and did not principally aim to reduce income tax. Delivered alongside other judgments underscoring the weight of taxpayers’ subjective aims, the ruling confirms that merely bringing about unavoidable tax results does not, by itself, defeat the main purpose test; something additional is required (as Lady Justice Falk explained in Blackrock HoldCo 5 v HMRC [2024] STC 740 (Blackrock)). It illustrates that proof indicating a subjective main purpose is indispensable and cannot be avoided, even when the tax effects are tightly intertwined with the act itself. In short, the tribunal kept the enquiry anchored to what the participants intended, not what their steps unavoidably produced, and confirmed that TIS bites where avoiding income tax was a main driver, not CGT. The UT also stopped short of deciding that taxpayers must have consciously weighed a hypothetical alternative structure against the one actually implemented in order for the...

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