· The Court of Appeal has cast some doubts on Lord Hoffmann's restatement.
· The Court of Appeal held that a tax scheme was effective even though it involved circular movements of money and would not have been undertaken had it not been for the tax benefits. The court considered certain claims for capital allowances in respect of expenditure on the acquisition of a gas pipeline. The relevant stat concept was one of ‘incurring expenditure’. The CA, overturning the view of Park J, held that the phrase must be given a legal meaning. Peter Gibson was scathing in his view of Lord H’s distinction:
· Peter Gibson LJ
· If in accordance with Macniven it is necessary to determine whether the concept of incurring expenditure on the provision of an asset is legal or commercial, I would hold that it was legal by analogy with the concept of “payment” which in Macniven was held to be a legal concept. I do not doubt that it is due to my own failings that I find Lord Hoffmann's dichotomy of concepts a difficult one to apply. The touchstone appears to be whether the commercial man would say of a statutory expression “You had better ask a lawyer”. It is far from obvious to me that the commercial man, knowing anything of the dozens of cases in which the distinction between capital and income has been explored, would say that those concepts are commercial; whether a transaction is of an income or capital nature is normally treated as a question of law. Yet income and capital are described by Lord Hoffmann as business concepts.
· On any view, as it seems to me, the fundamental question is the true construction of the statutory provisions, and the application of the meaning so ascertained to the facts.
· Carnwath LJ
· I also find some difficulty in understanding this dichotomy. Lord Hoffmann regarded McGuckian and Furniss, as illustrations of “commercial” concepts, and as therefore susceptible to Ramsay analysis. However, in each case, there seems a strong case for regarding the statutory concept as one of law, or certainly one on which a commercial man would look to a lawyer for advice.
· For the time-being, it would be wrong to see MacNiven as marking a significant change of direction, whether by way of narrowing or expansion of the Ramsay principle. The paramount question always is one of interpretation of the particular statutory provision and its application to the facts of the cases.
· Mcfarlane and Simpson: there is little doubt that Peter Gibson LJ has a point here: Lord H’s test certainly needs further elaboration. In particular, in its current form it offers only to identify legal concepts in the abstract. What is needed is a test identifying, within the context of a specific piece of legislation, when it is that Parliament is to be taken to have used a particular term in a legal sense. If the meaning of a particular legislative term is contestable in this way, then it seems inevitable that Parliament may have used it in one sense or the other. Asking the man in the street about the particular word in the abstract therefore cannot assist; what is needed is an analysis of the term in its specific statutory context.