EWCA Civ 1010 (2009) Astall v HMRC

Relevant Discounted Securities and tax avoidance - HMRC won

Case Summary:

This case had been to the Special Commissioners and the High Court- HMRC winning both times. The Court of Appeal also found for HMRC. The judgment has an important analysis of the approach of the Courts to “tax saving transactions”.

The taxpayers acquired securities that were redeemed pursuant to their terms of issue in a manner that caused them to incur substantial losses. They contended that the securities were Relevant Discounted Securities. If they were right in this they could set the loss against other income because a loss incurred on a RDS (Schedule 13 FA1996) is deductible for income tax purposes. The appellants were a party to a tax scheme designed to create an artificial loss to offset against taxable income.

It was held that the securities were not RDS. A purposive interpretation was used.