Interpretation and Avoidance

The interpretation of taxing statutes

The traditional approach

Styles v Treasurer of Middle Temple

Wills J
I am rather disposed to repudiate the notion of there being any artificial distinction between the rules to be applied to a taxing Act and the rules to be applied to any other Act. I do not think such artificial distinctions can help anybody arrive at the plain meaning of words.

Mangin v IRC

Lord Donovan
The words are to be given their ordinary meaning. They are not to be given some other meaning simply because their object is to frustrate legitimate tax avoidance devices. Moral precepts are not applicable to the interpretation of revenue statutes.

Partington v AG

Lord Cairns LC
If the subject comes within the letter or the law he must be taxed, however great the hardship may appear to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. If there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute.

Cape Brandy Syndicate

Rowlatt J
In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

Ramsay v IRC

Lord Wilberforce
A subject is only to be taxed on clear words, not on ‘intendment’ or on the ‘equity’ of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What are ‘clear words’ is to be ascertained on normal principles. There may, indeed should, be considered, the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.

Wilcox v Smith

R v Winstanely

Lord Wynford
If the legislature is not made to speak plain and intelligible language let not individuals suffer, but let the public… if there is any doubt about these words, the benefit of the doubt should be given to the subject.

Adamson v AG

Lord Warrington of Clyffe
It is incumbent upon the Crown to establish that its claim comes within the very word used… if there is any doubt or ambiguity, it can only be remedied by legislation.

Bladnoch Distillery v IRC

Lord Thankerton
If the provision is reasonably capable of two alternative meanings, the courts will prefer the meaning more favourable to the subject.

IRC v Ayrshire Employers Mutual Insurance Assoc

Lord Simonds
It follows that upon an initial assumption in favour of counsel (for the Revenue) the section became meaningless and the hypothetical profit or surplus indeterminable.
Lord Thankerton
The legislature has plainly missed fire.

Bladnoch Distillery v IRC

If the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect.

Comrs of C & E v Top Ten

The courts may find themselves so totally unable to draw the line as to decide nothing more than that the subject has not clearly enough been taxed.

Monroe, Intolerable Inquisition

This appears to be the judge’s dilemma. In looking for the meaning of a taxing statute he must reject as indications the purpose of the Act. His eyes must be fixed on the words, and the words alone, which he is called on to construe. If the words are clear, his task is over. He takes them, he applies them; down tumbles the sky, but the rules have been observed. If, however, the words are blurred, if they are not clear, then he may, nay he must, look at the context in which they are found and construe the Act as a whole.

Craven v White

The purpose does not appear to be of any assistance, for the elaborate provisions of the Act make it clear that the purpose was to tax some people and not others in respect of certain transactions and not others and one can only determine which people and which transactions by looking at the words of the section.

Dealing with tax avoidance

The traditional approach

Levene v IRC

Lord Sumner
It is trite law that His Majesty’s subjects are free, if they can, to make their own arrangements, so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the legislature for the imposition of taxes, they make it their business to walk outside them.
Flesch: recognises the moral right of the would-be tax avoider.

Ayrshire Pullman Motor Services v IRC

Lord President Clyde
No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property so as to enable the IR to put the largest poss shovel into his stores.

IRC v Duke of Westminster

So long as the form of the transaction is in fact carried out, it cannot be disregarded by the Commissioners or the court in favour of some more normal and likely form which would attract greater tax.
DoW entered into deeds of covenant to pay weekly sums to a number of his servants and thereafter reduced their wages by the same amount as was payable under the deeds.
HL, by a majority of four to one, decided that the courts could not disregard the form of the transaction and substitute their own view of substance, unless it was alleged and proved that the form was a sham and was not intended to be given legal effect. As, in the case, the deeds of covenant were certainly intended to be given effect to and were, in fact, acted upon, HL held that they were valid to reduce the Duke’s surtax.
Lord Tomlin
every man is entitled, if he can, to order his affairs so as that the tax attaching under appropriate Acts is less...

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Interpretation And Avoidance Notes

Updated Interpretation And Avoidance Notes