if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax (Tomlin 19-20).
Whether by reason of raised social consciousness, shifts in the material conditions of taxpayer existence, or mere evolution of interpretation, by the early 1980s sentiment appears to have changed with respect to appropriate disposition of tax obligations. Two cases were of particular note. The first was Inland Revenue Commissioners v. Burmah Oil Co. Ltd. in 1981, and the second was W.T. Ramsay Ltd. v. Inland Revenue Commissioners in 1982.
In Burmah, the company sold property to a subsidiary but made no attempt to collect the debt. The property, with wa the subsidiary's only real asset, declined in value, which made the debt uncollectible. Burmah then caused a bank to float a loan to the subsidiary in the amount of the debt, which then was paid off to Burmah. Burmah then sold the subsidiary, now without any assets, at a loss, and claimed a tax loss on the sale of the asset (i.e., the subsidiary)in consequence. The HL determined that Burmah had not really lost on an asset but had just used its own capital to construct a debt and yield a loss (Tiley 312).
The Ramsay facts were that a taxpayer company had a profit on hand that was subject to taxation. In order to offset that tax, the company (Ramsay) borrowed money from a bank to buy shares of a company at a premium price and on the same day made two loans to that company each in the amount of รบ218,750, carrying 11% interest each. The terms of the agreement included a prepayment provision and a provision whereby the interest rates could be adjusted, such that any decrease in the rate of interest on one loan had to be offset ...