The outcome of the case can be widely applied and a defeat could potentially
have cost the government hundreds of millions of pounds.
HM Revenue &
Customs had initially lost the case at the Special Commissioners against the
companies involved, Prizedome and Limitgood.
The case revolves around the use of capital losses and claiming a tax loss
where there was no corresponding economic loss. The scheme was known as a
‘pre-entry losses’ arrangement.
There is approximately £30m of tax at stake for each company, and it is
believed that many other companies are engaged in similar planning. The scheme
has since been closed down in legislation.
When the matter went before the
Commissioners chairman Theodore Wallace delivered a casting vote in favour
of the two companies as fellow commissioner Dr John Avery Jones agreed with
But in the High Court, Mr Justice Blackburne ruled that courts should be
given some scope to interpret intricate legislation.
‘The courts have frequently to apply a statutory provision to circumstances
which Parliament either did not, or arguably did not, have in mind at the time
of enactment,’ he said in his judgment
Advisers who have followed the case believe the matter is unlikely to stop at
the High Court and could go all the way to the House of Lords.
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