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Yet another FTT judge gets main purpose test wrong

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As has been mentioned here before a main purpose is not properly legally defined in the negative as something that is not "just icing on the cake" (that is obviously far too strict a test).

To think that (in para 275(3) - following HMRC's dodgy submission in para 267) is to totally misread/misunderstand Sema. In this case it made no difference (like the other recent case I mentioned this happening) as the scheme was totally hopeless (one wonders why anyone thought it ever had any chance of working - it would have been better to simply refund the fighting fund).

Interesting comments at the end re a recusal attempt by appellants – the judge was understandably totally incredulous re their WS evidence.

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By Tax Dragon
18th Jan 2021 10:22

Is that clause ('something that is not "just icing on the cake"') to be taken as 'definitional'? Surely not - for as you say, 'defining' in the negative is not really defining (and I would add 'defining' by metaphor probably even less so).

Had HMRC/the court said that the taxpayers had to demonstrate that they would have undertaken the transactions irrespective of the tax advantage, that might have been a better, more useful, test. (Here, the judge decided the answer was that they would not have done so, as the "only main purpose" (lovely expression!) of the transactions was the tax advantage.) Is that fair?

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Replying to Tax Dragon:
By Justin Bryant
18th Jan 2021 10:58

Yes, you are (basically) correct and well done for not agreeing with this clearly wrong judge on this point (although as I say, fortunately it made no practical difference in this particular case - the "main" problem is that most FTT judges tend to give HMRC counsel excessive sympathy/respect, so HMRC's dodgy submissions (as in this case) aren't really questioned and are too readily accepted with little if any scepticism).

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