“(1) If the Commissioners for Her Majesty’s Revenue and Customs consider, on reasonable grounds, that conditions A to D are or may be satisfied in relation to a transaction to which a company falling within subsection (2) is party, they may give the company a notice under this section. (2) A company falls within this subsection if— (a) it is resident in the United Kingdom, or (b) it is resident outside the United Kingdom but is within the charge to corporation tax. (3) Condition A is that the transaction to which the company is party forms part of a scheme that is a qualifying scheme. (4) Condition B is that the scheme is such that for the purposes of corporation tax the company is in a position to claim or has claimed an amount by way of deduction in respect of the transaction or is in a position to set off or has set off against profits in an accounting period an amount relating to the transaction. (5) Condition C is that the main purpose, or one of the main purposes, of the scheme is to achieve a UK tax advantage for the company. (6) Condition D is that the amount of the UK tax advantage in question is more than a minimal amount. … (9) Schedule 3 makes provision about what constitutes a qualifying scheme.”
“For the purposes of this Chapter, a scheme achieves a UK tax advantage for a person if in consequence of the scheme the person is in a position to obtain, or has obtained— (a) a relief or increased relief from income tax or corporation tax, (b) a repayment or increased repayment of income tax or corporation tax, or (c) the avoidance or reduction of a charge to income tax or corporation tax.”
“A scheme falls within this Part if a party to a transaction forming part of the scheme is a hybrid entity.”
“(1) An entity is a hybrid entity if— (a) under the tax law of any territory, the entity is regarded as being a person, and (b) the entity’s profits or gains are, for the purposes of a relevant tax imposed under the law of any territory, treated as the profits or gains of a person or persons other than that person…”
“The existence of a UK tax deduction is not enough in itself to show that a scheme has a main purpose of obtaining a UK tax advantage. A tax advantage main purpose implies that in the absence of the scheme, tax deductions arising from the scheme would not have arisen at all, or would have been of a lesser amount. Hence it will be relevant to draw a comparison in order to consider whether, in the absence of the hybrid entity or instrument: • the transaction giving rise to the deduction would have taken place at all; • if so, whether it would have been of the same amount; and • made under the same terms and conditions”; • the transaction giving rise to the deduction would have taken place at all; • if so, whether it would have been of the same amount; and • made under the same terms and conditions”; vii) Paragraph 23 indicates that a comparison should be based on “equivalent arrangements that did not make use of any hybrid entities or instruments”; viii) Paragraph 25 states that in making the comparison, “it is important to remove only the arbitrage element created by the hybrid entity or instrument and not to alter other features in the arrangements. The comparison should not be drawn on the basis of an assumption that real investment activity funded by the scheme would not have taken place without the arbitrage”
“A loan of 1000 is made by a foreign parent company to its UK subsidiary, to be used solely to finance the building of a new factory. The loan is structured through a qualifying scheme within the meaning of the legislation and is made via a hybrid entity. The UK company gets a deduction for the interest it pays under the loan but, because of the scheme, the foreign parent also gets a foreign tax deduction for the same interest. In order to determine whether a UK tax advantage was a main purpose of the scheme, an appropriate comparison must be made. Given that in this case the loan was made for a clear nontax purpose, i.e. the new factory, it is reasonable to suppose that the investment would have been made in the absence of the scheme. Consequently the appropriate comparison of the UK tax effect of the scheme would be where the same loan was made by the parent company but without the benefit of using a hybrid entity. If in this case the debt finance would have been made to a UK entity (or UK branch) on similar terms and conditions, the arbitrage legislation will not apply.” x) In this example, the comparison is between the actual arrangements and a “plain vanilla” loan on which the interest payments give rise to single tax deductions: “[i]f the loan would have been made in the same amount and under the same terms and conditions, the scheme does not have the obtaining of a UK tax advantage as one of its main purposes … If, on the other hand, the facts and circumstances indicate that the existence, amount or terms and conditions of a loan have been influenced by an arbitrage opportunity in a way that increases the UK tax deduction, and that this was a main purpose of a scheme exploiting the arbitrage, Condition C will have been met.” xi) Paragraph 32 refers to a case involving outward investment, noting that “arbitrage may arise where an equity investment is made in such a way that interest expense is taken into account in both the UK and another jurisdiction. As with inward investment, the question to be addressed is whether the arbitrage opportunity has affected behaviour in a way that reduces the amount of UK tax, in particular by increasing net interest deductions”; xii) HMRC, for their part, placed particular reliance on a passage in the examples annexed to the guidance, intended to assist companies in deciding whether their arrangements might fall within the AntiArbitrage Rules. In example two, dealing with an outward investment, part 3 describes a situation where it is assumed that the scheme is set up “solely in order to replace a loan that had previously been provided for an existing overseas subsidiary” where the scheme “did not result in any new funds being made available to the foreign subsidiary [and where] the foreign subsidiary already incurred an interest deduction because of the previous loan to a UK group company”
“the scheme lacks a commercial purpose because it does not make new funds available to a foreign subsidiary; and it did not have the purpose of creating a foreign tax deduction, because the same deduction already existed. It is therefore hard to avoid the conclusion that under these facts, the scheme is intended to create a deduction to match and therefore cancel the interest receipt arising in the UK under the previous arrangement.”
“Precisely what information and supporting material the application should contain will depend on the relevant facts and circumstances and on the nature of the clearance requested. It is not therefore possible to list the information required in all circumstances. Diagrammatic charts and step by step details of the transactions are particularly useful, together with explanations of the purposes of the scheme and reconciliation of how funds are used.”
“that: (i) the main reason(s) or main purpose(s) of the Australian Investment being funded by loans and held by the UK Subgroup were all genuine commercial reason(s)/purpose(s); and/or (ii) none of the main purposes of the Australian Investment being funded by loans and held by the UK Subgroup was to secure a UK tax advantage.”
“it is important to remove only the arbitrage element created by the hybrid entity or instrument and not to alter other features in the arrangements. The comparison should not be drawn on the basis of an assumption that real investment activity funded by the scheme would not have taken place without the arbitrage…”
“GE’s case (both now and during the Clearance Discussions) was that the ‘commerciality’ of the Australian Investment was relevant to whether or not the hypothetical comparator that GE was putting forward was ‘objectively reasonable’ (HMRC’s terminology). Importantly, however, in that context GE did not need to show that the Australian Investment (or the hypothetical comparator transaction put forward by GE) was undertaken for wholly commercial reasons and not motivated atall by tax considerations…”
“without the hybrids being in the scheme there would have been no scheme at all under which the UK Subgroup acquired the Australian Investment. The relevant comparator was therefore no scheme at all under which the UK Subgroup acquired the Australian Investment. On this basis, the main or one of the main purposes of the scheme was obviously to achieve a UK tax advantage.”
“The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”
“Such loans have been made under terms that would have been incurred on plain vanilla debt, in amounts and circumstances where the loans could also have been made in the absence of the hybrid entity status of any entity in the chain.”
“In evaluating the investment decision, the UK Group could have chosen to borrow in the UK to fund the Australian operations with debt in a manner that did not involve hybrid entities. In such case, the economic effect of the deduction would reside in Australia (because the UK would have both a deduction and an offsetting inclusion, while Australia would be left with a deduction). However, in light of the parity of rates between the UK and Australia (both 30%) and certain tax incentives available in Australia, it is reasonable for a worldwide group to choose to borrow in the UK and fund an investment in Australia with equity … In such a case, a UK deduction would be available in the absence of any hybrid scheme. The effect of the Australian hybrid entity is to maintain the same UK tax result arising from an equity investment in Australia, while also allowing a deduction to reduce offshore tax in Australia. Again we conclude the legislation should have no application here.”
“[the Australian Transaction] is being funded by equity from UK – who are borrowing from US. Thus there is a net deduction in the UK. By using the scheme the UK is achieving a UK tax advantage. The comparator would be the US investing in Australia without UK involvement at all. In that situation there would be no UK deduction.” v) In the meeting note, HMRC are recorded as having said to GE that they “…did not like the Australian structure because they think that the transaction would not have taken place absent the hybrid opportunities.” vi) That was repeated in an email from Mr Almand to Mr Clark stating HMRC’s view that “in the absence of a substantial commercial reason for the Australian acquisition to be held by the UK group, we conclude that the investment by the UK would not have been made at all in the absence of the arbitrage opportunity.”
“Australian acquisition – under UK. Again, said banking in UK is main factor for using UK. Accepted their view.”
“Australia acquisition: in the absence of a substantial commercial reason for the Australian acquisition to be held by the UK group, we conclude that the investment by the UK would not have been made at all in the absence of the arbitrage opportunity…”
“Also, the only reason that it was an ‘attractive one for the UK group’ was because of the tax benefits arising from the scheme.”
“The comparator here is not borrowing without a hybrid (plain vanilla loan) because the transaction would not have taken place at all absent the hybrid hence none of the interest expense would have been incurred.”
“As discussed at our meetings, we are not satisfied that the scheme did not have a main purpose of achieving a UK tax advantage.”
“if a fraudulent representation is relied upon, in the sense that the claimant would not have parted with his money if he had known that it was false, it does not matter that he also had some other negligent or irrational belief about another matter and, but for that belief, would not have parted with his money either. The law simply ignores the other reasons why he paid.”
“…shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by theLimitation Act 1939 was applied before1st July 1940 .”
“In a case where a fraud has been committed, the defrauded person may have two remedies. He may have an action for damages at common law; or he may have, possibly, in a case like the present, an equitable remedy for rescission of contract. If he brings his action at common law he has to take care that he is not met by the plea of the Statute of Limitations, which would be a good plea in answer to his claim, though based on fraud, if he knew all the main relevant circumstances on which his claim in respect of the fraud was based more than six years before action brought. Now, if instead of bringing his action at law, he seeks the equitable remedy, it is true that the Statute of Limitations does not directly apply. But it applies indirectly, for it is settled law that where it is only a question of the remedy and you come into equity with a case such as I am considering for the purpose of getting equitable relief, then the equity of the court acts by analogy to the Statute of Limitations, and will not allow the plaintiff to succeed if his action is brought more than six years after knowledge of the facts has been acquired by him which justify his coming to the court.”
“If, however, he delays his claim to rescission until after the lapse of six years from his discovery of the fraud, then the Court will (apart from any other point) act by analogy to the Statute of Limitations and refuse to grant relief: see Oelkers v Ellis.”
“It is not surprising that equity should apply by analogy the limitation periods applicable to claims at law for an account and for damages for breach of duty, whether in contract or tort, to claims for an account and for equitable compensation. In each case the same facts give rise to a claim, whether at law or in equity, and the same kind of relief is obtainable.”
“HMRC was entitled to rescind, alternatively terminate, the Settlement Agreement in the event that IGE had failed to give full disclosure of any material fact relating to the Settlement Agreement.”
“The taxpayers' only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law: Reg. v. Attorney-General, Ex parte Imperial Chemical Industries Plc. (1986) 60 T.C.1 , 64G, per Lord Oliver of Aylmerton. … No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary. If it is to be successfully said that as a result of such an approach the revenue has agreed to forgo, or has represented that it will forgo, tax which might arguably be payable on a proper construction of the relevant legislation it would in my judgment be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled. I say “ordinarily” to allow for the exceptional case where different rules might be appropriate, but the necessity in my view exists here. First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the revenue's ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the revenue the ruling sought. It is one thing to ask an official of the revenue whether he shares the taxpayer's view of a legislative provision, quite another to ask whether the revenue will forgo any claim to tax on any other basis. It means that the taxpayer must make plain that a fully considered ruling is sought. It means, I think, that the taxpayer should indicate the use he intends to make of any ruling given. This is not because the revenue would wish to favour one class of taxpayers at the expense of another but because knowledge that a ruling is to be publicised in a large and important market could affect the person by whom and the level at which a problem is considered and, indeed, whether it is appropriate to give a ruling at all. Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.”