“… one result of such methods, if they succeed, is, of course, to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire, or do not know how, to adopt these manoeuvres.”
“739 Prevention of avoidance of income tax (1) Subject to section 747(4)(b), the following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfers of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled outside the United Kingdom. (1A) Nothing in subsection (1) above shall be taken to imply that the provisions of subsections (2) and (3) apply only if— (a) the individual in question was ordinarily resident in the United Kingdom at the time when the transfer was made; or (b) the avoiding of liability to income tax is the purpose, or one of the purposes, for which the transfer was effected. (2) Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated operations, such an individual has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled outside the United Kingdom which, if it were income of that individual received by him in the United Kingdom, would be chargeable to income tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts. (3) Where, whether before or after any such transfer, such an individual receives or is entitled to receive any capital sum the payment of which is in any way connected with the transfer or any associated operation, any income which, by virtue or in consequence of the transfer, either alone or in conjunction with associated operations, has become the income of a person resident or domiciled outside the United Kingdom shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts.”
“740.— Liability of non-transferors (1) This section has effect where— (a) by virtue or in consequence of a transfer of assets, either alone or in conjunction with associated operations, income becomes payable to a person resident or domiciled outside the United Kingdom; and (b) an individual ordinarily resident in the United Kingdom who is not liable to tax under section 739 by reference to the transfer receives a benefit provided out of assets which are available for the purpose by virtue or in consequence of the transfer or of any associated operations. (2) Subject to the provisions of this section, the amount or value of any such benefit as is mentioned in subsection (1) above, if not otherwise chargeable to income tax in the hands of the recipient, shall (a) to the extent to which it falls within the amount of relevant income of years of assessment up to and including the year of assessment in which the benefit is received, be treated for all the purposes of the Income Tax Acts as the income of the individual for that year; (b) to the extent to which it is not by virtue of this subsection treated as his income for that year and falls within the amount of relevant income of the next following year of assessment, be treated for those purposes as his income for the next following year, Page 7 and so on for subsequent years, taking the reference in paragraph (b) to the year mentioned in paragraph (a) as a reference to that and any other year before the subsequent year in question.”
“(9) For the purposes of sections 739 to 741— (a) a reference to an individual shall be deemed to include the wife or husband of the individual; (b) ‘assets’ includes property or rights of any kind and ‘transfer’, in relation to rights, includes the creation of those rights; (c) ‘benefit’ includes a payment of any kind.”
“741 Exemption from sections 739 and 740 Sections 739 and 740 shall not apply if the individual shows in writing or otherwise to the satisfaction of the Board either— (a) that the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them were effected; or (b) that the transfer and any associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation. The jurisdiction of the Special Commissioners on any appeal shall include jurisdiction to review any relevant decision taken by the Board in exercise of their functions under this section.”
“744.— No duplication of charge (1) No amount of income shall be taken into account more than once in charging tax under the provisions of sections 739 Page 9 and 740; and where there is a choice as to the persons in relation to whom any amount of income can be so taken into account— (a) it shall be so taken into account in relation to such of them, and if more than one in such proportions respectively, as appears to the Board to be just and reasonable; and (b) the jurisdiction of the Special Commissioners on any appeal against an assessment charging tax under those provisions shall include jurisdiction to review any relevant decision taken by the Board under this subsection.”
“everything was done by her father, she merely signed documents when asked to do so”: p 177. At first instance, Wrottesley J described how the preamble insection 18 of the Finance Act 1936 (now section 739(1)) set out the purpose of the section as that of preventing tax avoidance by individuals “by means of transfers of assets”
“to deal with the plain and straightforward case of an individual bent on evading tax and doing so by means of a transfer. The Section does not deal with the case of an individual who escapes tax because of a transfer which some other person makes. The use of the words ‘by means of’ fits this interpretation.”
“We do not think the words ‘by means of’ connote activity by the individual concerned. According to the Shorter Oxford Dictionary the primary meaning of the words is ‘by the instrumentality of a person or thing’, and they are fully satisfied if the avoidance of tax is effected through the instrumentality of the transfer by whosoever it is executed. A fortiori is this the case if we take the second meaning given in that dictionary, ‘in consequence of, owing to’. Nor do we think that the use of the phrase in the preamble in conjunction with the word ‘avoiding’ compels us to interpolate something that is not there and read ‘by means of transfers of assets’ as if it were ‘by means of transfers of assets made by them’.”
“each and every one of such beneficiaries if resident in the United Kingdom is liable to income and surtax in respect of the whole of the income of the trustees.”
“The first is to regard it as having a limited effect: to be directed against persons who transfer assets abroad; who by means of such transfers avoid tax, and who yet manage when resident in the United Kingdom to obtain or to be in a position to obtain benefits from those assets. For myself I regard this as being the natural meaning of the section. This avoids all the difficulties discussed above. No difficulty arises from cases of multiple transferors. The second is to give the whole section an extended meaning, so as to embrace all persons, born or unborn, who in any way may benefit from assets transferred abroad by others. This is or follows from the Congreve interpretation. This I regard as a possible but less natural meaning of the section.”
“But the argument turns the other way when so draconian a tax (‘astonishingly severe’ were Mr. Nolan's words [counsel for the Crown]) is sought to be imposed upon persons who had no hand in the transfer, who may never benefit from it, who cannot escape from it, who remain under liability so long as they live or the settlement lasts. In relation to such persons equity and principle suggest that Parliament intended no such thing —or at least cannot be assumed from the veiled language used to have intended any such thing. To penalise is one thing, to visit the sins of the transferor on future generations is quite another.”
“the section interpreted as applying only where the person sought to be charged made, or, may be, was associated with the transfer.”
“I consider that the natural and intended meaning of the words ‘such an individual’ in section 412(1) is that they indicate not merely an individual ordinarily resident in the United Kingdom, but an individual so resident who has sought to avoid liability to income tax by means of such transfers of assets as are mentioned in the preamble. Further, this meaning gives a sensible content, which would otherwise be lacking, to the provision in subsection (8) (a) that reference to an individual shall be deemed to include the husband or wife of the individual. Finally, the consequences which follow from attributing the wider meaning to the words, when that meaning is applied to a numerous class of beneficiaries under a discretionary trust, are so dramatically unjust, as the facts of the present case illustrate, that I cannot think it to have been intended by Parliament.”
“Taxes are imposed upon subjects by Parliament. A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined. A proposition that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body represents a radical departure from constitutional principle. It may be that the revenue could persuade Parliament to enact such a proposition in such terms that the courts would have to give effect to it: but, unless it has done so, the courts, acting on constitutional principles, not only should not, but cannot, validate it. … The fact in the present case is that Parliament has laid down no basis on which tax can be apportioned where there are numerous discretionary beneficiaries.”
“But even if we were prepared to accede to the argument that the preamble connoted activity by the individual concerned, we think this condition would be fulfilled if the execution of the transfer were procured by the individual concerned, even though it was not actually executed by him or his agent. Mr Tucker, in commenting on the judgment of the learned Judge in the Court below, said, and Mr Jenkins [counsel for the Commissioners] agreed, that execution by a company could not be said to be execution by the individual, even though the individual owned all or practically all the shares in the company. We think, however, that the decision of the learned Judge can be upheld on the ground we have stated, since it is, we think in the present case, a reasonable inference from the facts found that the execution and performance of the transfers and associated operations in question by all the companies concerned were procured by Mrs Congreve acting through her agent Mr Glasgow. We should have been prepared, if it had been necessary, on this alternative ground to uphold the decision of the Commissioners.”
“should be departed from or overruled and the section interpreted as applying only where the person sought to be charged made, or, may be, was associated with, the transfer.”
“though the actual decision of the case can be upheld on the alternative ground stated by Cohen LJ in his judgment”
“It follows that the Court of Appeal did not think that the fact that Mrs Congreve had only a 65% interest in Humphreys & Glasgow (England) prevented that company’s transfer of assets to Humglas as being one of ‘the transfers … procured by Mrs Congreve acting through her agent Mr Glasgow’.”