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Prediction 1. We are in for a prolonged period of uncertainty as the judges decide which terms are to be construed ‘commercially’ and which ‘juristically’. Judges are going to have to be far more explicit about the reasons for taking one approach rather than another. Lord Nicholls’ explanation that the word payment cannot vary according to the purpose for which the payment of interest is made itself helpful, not least because it solves another issue, why the House concentrated on the word ‘payment’ rather than the phrase ‘payment of interest’. Looking at the state of our legislation in all its detailed complexity, especially in recent years, it seems at first sight that there might be little room for that anything but a juristic approach—we shall see. One can also predict that the judges will quickly find this categorisation far too crude; many areas of tax law are not concerned with commercial transactions, so different antitheses to ‘juristic’ may have to be found. |
Prediction 2. The courts will have to pay far more attention to disentangling questions of interpretation from questions of application. Even the speeches in the House of Lords in Westmoreland talk again and again about determining the true character of the transaction with which they are concerned and sometimes they seem to muddle up interpretation and application. Thus both Lord Nicholls (paragraph 8) and Lord Hoffman (paragraph 46) identify the point in Furniss v Dawson as being whether the disposal of shares was in favour of Wood Bastow and not in favour of Green Jacket. However, as leading counsel has pointed out in a splendid conference organised by Key Haven Publications, if one were to take Lord Hoffmann’s approach strictly one should perhaps ask something quite different. One would ask whether the share-for-share exchange between the Dawson family and Green Jacket came within the relevant statutory provision, which might turn on the question whether Green Jacket ever had control of the shares in the operating company.16 However one can take this point further. The relevant provision for 1971–72 was FA 1965, sch 7, paragraph 6. This not only contains the control test in subparagraph (2) but also refers in subparagraph (1) to the situation in which Greenjacket ‘issues shares’ to the Dawson family. So one has several concepts with which a court may play and to which it may apply either a juristic construction (perhaps, in the light to National Westminster Bank v IRC,17 to issuing the shares) or a commercial construction (the matter of control). This approach is quite different from that of Lords Nicholls and Hoffmann. The author firmly believes that Lords Nicholls and Hoffmann did ask the right question; but that is because he also believes that the characterisation of the facts in the case must come before the interpretation. The author and Lord Hoffmann seem to disagree on which is the cart and which is the horse; much time will have to spend mucking out this particular stable yard. |
Prediction 3. Although we have absolutely no idea how things are going to work out, it is clear that the new era is not necessarily going to favour the taxpayer as against the Revenue. By freeing the taxpayer from some arguments based on the composite transaction doctrine, Lord Hoffman has reinforced and developed what Lord Cooke and Lord Steyn said in McGuckian—all issues of construction are now to be looked at in their statutory context but are to be addressed purposively. As Lord Nicholls put it, it would be wrong to set bounds to the circumstances in which the Ramsay approach may be appropriate and helpful (paragraph 8). It is going to be very interesting to watch the courts interpret statutes purposively when those statutes have not been drafted with that approach in mind. |