UKFTT 152 (2009) Ebsworth v HMRC

S703 - tax avoidance - Taxpayer won

Case Summary:

A company which had received a substantial sum was liquidated and Mr and Mrs Ebsworth made capital gains. HMRC thought that if another route had been followed more income tax would have been due and assessed on Mr Ebsworth (but not his ex-wife) under S703 ICTA 1988 (now S684 ITA 2007) on the basis he had obtained a tax advantage.

The key issue was whether tax avoidance was the main object or one of the main objects of the transactions.

The Ebsworths had separated and Mrs Ebsworth wanted out with the minimum hassle. The judge concluded that her wishes had been a key driver in leading to the liquidation.

The decision was

• the main purpose or one of the main purposes of the transactions in question was not the avoidance of tax
• the transactions were bona fides commercial transactions.
• the transactions were in the normal course of managing investments.