David Milne KC, Richard Vallat KC and Calypso Blaj discuss the implications of Hargreaves, in particular:

1. What we can say about what is meant by "beneficial entitlement"? 
2. How is it different to "beneficial ownership"? 
3. And indeed to the trust law concept of both? 
4. Is there a different international fiscal meaning of beneficial entitlement?

The panel look at where these issues may come up in practice. How definitive is the Hargreaves case? They also take a look at Altrad Services and the loss of beneficial ownership.

Discussion of Hargreaves

2:38 Whether interest payments made to a UK resident company fell within an exception to the obligation to withhold tax on payments of interest under ITA. This depends on whether the recipient is beneficially entitled to the income. The CA reviewed the case law (para 49ff of the judgment). It then applied the principles to the facts (para 61ff).

8:10 It is important that the provisions put in place were specifically to obtain a tax advantage (which was admitted). The question was whether the tax planning worked. The recipient of the interest payments was under a contractual obligation to pay on the money it received so was it the beneficial owner therefore? The judgment gives guidance as to the domestic meaning of beneficial entitlement.

11:39 What of the rival definition of "beneficially entitled", also known as the international or fiscal meaning? Should this be adopted in a withholding tax situation? Discussion of Indofood and the ECJ cases in 2019. The international, fiscal meaning has to take into account the objects and purposes of the Convention including avoiding double taxation. This differs from the domestic law requirements per Ramsay of whether the concept fits within the statutory purpose and context of the provisions.

17:05 Conduit arrangements (insertion of a company) caught under either definition. However, theoretically there may be other cases where you are treated as being beneficially entitled under say the international, fiscal meaning but not under the domestic meaning.

18:35 The domestic meaning should not be dependent on finding a tax avoidance motive.  

Losing beneficial ownership

20:00  Altrad Services/Wiseman. Turned on "ceasing to own" in s61 Capital Allowance Act. Marketed tax avoidance scheme. Application of Ramsay purposive principle. See Tax Journal article on Altrad in July 2024. Case quite an extreme example so there might be other cases which are less clear cut.

28:07 NB there does not have to be someone who has beneficial ownership.

Areas where beneficial ownership comes up

28:47 Withholding tax on interest payments, double tax treaties (dividends and royalties), domestic group relief provisions (eg CGT, substantial shareholding exemption, SDLT).

Other comments

30:52 What if the conduit company in Hargreaves had actually used some/all of the money even for a short period? Or had another reason for existing other than being a conduit?

31:54 What if in Altrad, the complex arrangements designed to take advantage of capital allowances had actually been subject to a contract that was rescinded?

Legislation

Income Tax Act 2007 s933

Capital Allowances Act s61

Directive 2003/49

Cases

Hargreaves v HMRC [2024] EWCA Civ 365

Sainsburys v O''Connor [1991] EWCA Civ J0522-3

Parway Estates v IRC (1958) 45 TC 135

Bupa Insurance Ltd v HMRC [2014] UKUT 262 (TCC)

Indofood International Finance v JP Morgan Chase Bank [2006] STC 1195

WT Ramsay Ltd v IRC [1982] AC 300

Altrad Services v HMRC  [2024] EWCA Civ 720

Hurstwood & Rosingdale [2021] UKSC 16

Wood Preservation v Prior [1969] 45 TC 112

Joined cases C-115/16, C-118/16, C-199/16 and C-299/16

Gestmin SGPS SA v Credit Suisse [2013] EWCA 3560 (Comm)

Philip Baker KC's commentary on the OECD Model Convention (2017)

 Tax Journal article on Altrad in July 2024

Laura 0:10

Welcome to pump court tax check podcast series brought to you by the barristers at pump court tax chambers. We are the largest UK tax set and our podcasts aim to give you insight into recent developments in tax law and procedure. Across the series, we'll look at a range of topics covering issues that arise both in disputes and in advising clients more generally.

Laura 0:32

All of the cases and legislation mentioned in a podcast are set out on our website in the listing for that particular recording. If you have any questions, please do contact one of our staff team. You can find their details on our website, pump tax.com.

Hello, my name is David Milne and welcome to Pump Court Tax Chat.

Richard Vallat, very much looking forward to my first Pump Court Tax Chat.

And Calypso Blige, I'll be dealing with beneficial ownership in an international context.

Hello, my name is David Milne and welcome to this Pump Court Tax Chat. Today, my colleagues Richard Vellat KC and Calypso Blaj will be discussing the tricky subjects of beneficial ownership and beneficial entitlement as clarified by the recent judgment of the court of appeal in Hargreaves, which Richard and Calypso won for The Crown. And since the case is not being appealed to the Supreme Court, the judgment of the Court of Appeal is likely to be the last word on the subject for some years.

Hello and thank you, David. We're going to talk about, first of all, the judgment in Hargreaves. What can we say about what's meant by beneficial entitlement? How is that different from beneficial ownership? How is that different from a trust law concept of beneficial entitlement or ownership? And then we, in the form of Calypso, will go on to talk about the possibly different international fiscal meaning of beneficial entitlement. And then David's going to come back to another relevant case. And at the end, we will have a little discussion of where these issues might come up in practice, where the pressure points might be and where the lines might be drawn between someone having and not having beneficial ownership of an asset.

So starting with Hargreaves, there are several issues in Hargreaves. The relevant one for our purposes is whether interest payments made from 2012 onwards to a UK resident company called Houmet fell within an exception from the obligation to withhold tax on payments of interest found in the Income Tax Act 2007, section 933.

Richard 2:57

To quote that, a payment is an accepted payment if a person beneficially entitled to the income in respect to which the payment is made is a UK resident company. So the question there is whether a UK company paying to another UK company, Houmet, had to withhold tax in respect of the interest payment. And that turned on whether the recipient, Houmet, was beneficially entitled to that income.

Richard 3:26

The Court of Appeal held that in respect to the vast bulk of the interest, Houmet did not fall within the exception. The reference to beneficially entitled in section 933 was not in any sense immune from the requirement that legislation be construed purposively, and nor was there any special category of statutory concept that was immune from purposive construction. That, I would say, was perfectly orthodox at the high level.

Richard 3:55

The Court then went on to consider the case law on beneficial ownership and beneficial entitlement, and applied that in our case. The Court noted that the terms had been interpreted in a relatively well-established manner in domestic tax legislation, and then summarised the principles, paragraph 49 onwards, in the judgment. There are various cases referred to, I'll just use their short names.

So reading from the judgment, first, while perhaps not strictly a term of art, the concept of beneficial ownership is well-established, that's the Sainsbury case. In essence, it means ownership for the benefit of the person in question, referring to Wood Preservation. Secondly, there's a significant degree of overlap between beneficial ownership and equitable ownership.

Richard 4:43

In particular, a purchaser under a specifically enforceable contract can have beneficial ownership of the asset that has agreed to buy, Parway Estates. However, the concepts are not entirely co-extensive, Sainsbury again, in a case called Bupa. And the Court noted there, one reason why this must be so is that the concept of beneficial ownership needs to be capable of operating in legal systems that do not have the same legal traditions, including, as was fairly pointed out in Bupa, Scotland.

Richard 5:13

Thirdly, the fact that the concept of beneficial ownership is well-established does not mean the usual approach to statutory construction is to be ignored. Fourthly, consistent with the fundamental requirements of ownership for the benefit of the person in question, or ownership with benefits, a person who is the legal owner of property will not be its beneficial owner if they do not in fact have any of the benefits of ownership, such that they only hold a mere legal shell. Fifthly, in certain circumstances, it's possible for a property owner not to possess or to lose beneficial ownership without it vesting anywhere else.

Richard 5:52

And finally, this is again the Court of Appeal, that I would agree with the upper tribunal in Bupa that the concept of beneficial entitlement should be construed with regard to the authorities that consider the concept of beneficial ownership. In broad terms, therefore, it can be construed as entitlement with benefits. If the person in question would, in truth, have none of the benefits this entitlement would ordinarily bring, they will not be beneficially entitled.

Richard 6:17

So against that background, the court turned to consider the application to the Hargreaves case and the payment to Houmet. I'm not going to read out the detail of what was said, but this is now paragraphs 61 onwards in the judgment. As a reminder of the facts, Hargreaves was the ultimate parent to a group of companies engaged in property investment.

The group was founded by Mr. Andrew and the other directors were family members and in one case an advisor. The group acquired property primarily for investment, so it had a continuous and growing requirement for loan funding. That funding took a variety of forms, ranging from secured institutional funding to unsecured borrowings from connected persons.

Richard 7:08

Richard 7:57

There was no hiding or attempt to disguise the fact that the transactions that this case was concerned with were put in place to procure a tax advantage. The question wasn't, had there been tax planning? The question was, did the tax planning work? There were various steps which were intended to give various arguments against the operation of withholding tax, including changing the governing law of debts and so on and so forth. We don't need to worry about all of them.

Richard 8:28

What we do need to worry about is the insertion of this company called Houmet into a pre-existing loan structure, whereby the Hargreaves companies were obliged to pay interest to an offshore trust, offshore company, sorry, owned by a trust. And everyone knew that ordinarily a payment to an offshore company would attract a withholding obligation. There are aspects of the debt that the appellant said, Hargreaves said, called that into doubt but in general, a payment of interest to an offshore company would attract a withholding obligation.

Richard 9:06

One of the things that was done though was to insert Houmet so that there was an obligation to pay the interest to Houmet and then Houmet had a contractual obligation to pay the interest on to the offshore company. It's important to note there that the obligation to pay on was contractual. It wasn't the case that Houmet received the money as a fiduciary or a trustee in a strict English law sense.

Richard 9:37

It received it pursuant to a contract and the obligation to pay on was a contractual right to pay on. So the argument was over whether Houmet was beneficially entitled to the income when it was received. It was the owner in the sense that the legal and actual title to the interest vested in Houmet, but the revenue argued, we argued, that nonetheless, Houmet was not the beneficial owner because in short, it didn't have freedom to do what it wanted with the money.

The appellant's argument for the strict legal meaning was at odds with the general approach taken in tax law these days, which is to look at the commercial substance, or at least that is how the revenue would see it. But the appellant said, well, no, not here. Here, we should be looking at beneficially entitled in a strict legal sense because the authorities are clear that in this case, it's a legal concept.

Well, I've already said what the court concluded, which was that this was wrong and that beneficially entitled as any other term used in the tax legislation is liable to be construed in a purposive way and seen in context and that one can't simply say, oh, well, there is a legal meaning of beneficially entitled, which wins the case for me. So the Court of Appeals established that for domestic purposes, we should be looking at beneficially entitled as broadly entitlement with benefits. But there is a rival definition of beneficially entitled described sometimes as the international fiscal meaning.

And in the upper tribunal, before we got to the Court of Appeal, there was some discussion of whether that should be adopted in the context of withholding tax. I'm going to hand over to Calypso to explain what that might mean.

So this idea that beneficial ownership has a different meaning in an international context really came out of a case called Indofood, which the tribunals and Court of Appeal were referred to.

And in a nutshell, the Court of Appeal in Hargreaves said that Indofood Court of Appeal isn't relevant in a domestic context, but what the High Court said is Indofood would be. But it's worth breaking down, I think, what happened in Indofood just in outline. So what you had in Indofood was essentially an issuer company in Mauritius, which was the wholly owned subsidiary of a company in Indonesia.

And the issuing company agreed to pay the funds to its parent company. And the deal was the parent company would take care of the interest payments. And what Indofood was looking at was whether if you inserted a Dutch Newco in the middle, so you have interest payments going from Indonesia, parent company in Indonesia, to Newco in Netherlands, to issuer in Mauritius, whether that Newco in the middle is beneficially entitled to the interest.

And that all mattered because in the Indonesia-Dutch double tax treaty, the rate of withholding tax was half what it was under the Indonesian-Mauritius double tax treaty. And what happened in Indofood was the High Court said that because Newco would have the power to dispose of the interest as it wished, it had beneficial entitlement, even though it had a contractual obligation to pass the funds on. So you can see how that sort of situation isn't a million miles away from what was going on in Hargreaves.

But Indofood went on to the Court of Appeal, and critically, the Court of Appeal applied an international fiscal meaning, which I think could probably fairly be described as narrower than the domestic meaning. The Court of Appeal said that Newco didn't have the full privilege to directly benefit from the interest, so it wasn't the beneficial owner of the interest. So where Indofood and Hargreaves come in really is putting aside the Court of Appeal approach for a moment and looking at the High Court's approach.

Hargreaves looked at that and said that essentially that's fine, but you can't just transplant that domestic meaning as it's explained in the High Court into Section 933, which Richard set out earlier, without any analysis of whether the concept fits within the statutory purpose and context of the provision. So you're still coming back to Ramsay. So that approach, the international fiscal meaning, we see also borne out in a string of ECJ cases, which were handed down in 2019.

And the reason that went ahead was because the Danish companies in those cases were trying to argue that based on the directive, Directive 2003/49, the withholding tax that they would have had to pay on interest payments should be knocked out essentially because the receiving company was a beneficial owner of the interest. What's interesting about that is the ECJ didn't agree, and they considered that the concept of beneficial owner should mean an entity that has the power to determine freely the use to which interest is put. It's also worth looking at Philip Baker KC's commentary on the OECD model convention, which is looked at in Indofood.

And he says that you have to adopt a practical approach, really, and to ask yourself, for example, what would happen if Newco in the middle were to go bankrupt, whether in those circumstances you could say Newco was still beneficially entitled. So for example, if Newco went bankrupt and its creditors would get the funds, there might be an argument to say there's beneficial entitlement, but not otherwise. That, however, isn't a million miles away from what the High Court was saying in Indofood, which the Court of Appeal held wasn't necessarily conclusive.

So in short, I think there is quite clearly some difference in the domestic and international approach. It looks like it's harder to establish beneficial entitlement if you're using, say, a conduit company, applying the international fiscal meaning. But evidently, there is still some overlap because, to an extent, our courts and also looking at the OECD commentary are both looking at why this conduit company, if I can use that term, is being asserted in the first place, and whether there's treaty shopping to use language in the commentary.

So what we find is that there's significant overlap between the cases that will be course, as it were, where people will have or will not have beneficial entitlement to interest, depending whether you're applying the domestic or international fiscal definition. But those different definitions are not the same. So in cases where a company is inserted into an existing structure as a mere conduit, that will be caught on the domestic basis under Hargreaves and will equally be caught under the international fiscal basis.

That's pulled out as the very clear example in the commentary. A conduit arrangement falling short of a nominee ship is pulled out as a very clear example. But there will be other cases where arrangements have been put in place for either for commercial reasons or for slightly further removed tax reasons other than treaty shopping, maybe, where you might find that you have beneficial entitlement for international fiscal but don't have it for domestic tax purposes, for example.

I think we're struggling to think of concrete examples because they'd be extremely sophisticated arrangements that aren't really amenable to a five-minute discussion on the podcast. But theoretically, there must be room for that. The other difference, I think this is fair, is that although clearly the course of appeal is alive to the tax avoidance backgrounds, to the arrangements, Ramsay is avowedly not limited to tax avoidance cases, whereas the international fiscal meaning expressly has to take into account the objects and purposes of the convention, including avoiding double taxation and the prevention of fiscal evasion and avoidance.

So there is at least a more overt reference to tax avoidance and avoiding double taxation in the international fiscal meaning. I'm sure that's present in the thinking behind the Court of Appeal’s reasoning, but it's in theory anyway, the domestic meaning shouldn't be dependent on finding a tax avoidance motive. I mean, coming back to our case, as it were, to the Hargreaves case. It was an extreme example in that the tax avoidance was admitted, which is fair and right and no criticism of anyone, but it was admitted. It was very clear cut. Houmet had no other function.

It didn't do anything with the money. It was never going to do anything with the money. It couldn't really in practice ever have done anything else with the money. So it's a very extreme case. In some ways, that makes it a good example because it's easy for the court to, it's got a clear example either side of the line. In other ways, it makes it a less good example because with all possible respect to our opponents, it's hard to make a case that Houmet wasn't beneficially entitled when really all the commercial factors were on one side of the line.

It wasn't a case where there was much of a balancing act to be done. As soon as you moved away from a very strict legal meaning, you were into, as it were, difficulties for the taxpayer. It was perhaps obvious and certainly obvious with hindsight which way that case was going to go.

I think David, we were going to talk about, or you were going to talk about a case on a similar subject to do with losing beneficial ownership.

Yes. I'm going to talk about what's now called Altrad Services. It used to be called Cape Industrial and Wiseman, which was decided in June 2024 by the Court of Appeal. It's not really about beneficial ownership, although the upper tribunal were somehow persuaded that it was. But as Harriet Morgan in the first year tribunal and the Court of Appeal, who are Sir Lancelot Henderson, Lord Justice Nugee, and Lady Justice Whipple, they agreed that it was actually about the word ‘ceasing’ in the phrase ‘ceasing to own’ in the Capital Allowances Act.

Just to remind you briefly the context of that, in section 61 of the Capital Allowances Act, you have to bring in a disposal value into your Capital Allowance computations if, A, the person ceases to own the plant or machinery, and that was the root of this outflagged case, but B, the person loses possession of the plant or machinery in circumstances where it is reasonable to assume that the loss is permanent. C, the plant or machinery has been in use for mineral exploration and the person abandons it at the site where it was in use for that purpose. And D, the plant or machinery ceases to exist as such as a result of destruction, dismantling, or otherwise.

And as the Court of Appeal said, you wouldn't say plant or machinery ceases to exist if it were dismantled, say, for cleaning and reassembled three weeks later. And that's actually what more or less was happening in this scheme that was put forward back in the noughties when schemes of this sort were prevalent and no doubt blessed by leading tax counsel. What was happening there was that the Cape or Altrad was an industrial services provider and had already in its trade, scaffolding, pumps, tractors, cleaning equipment, which it had bought and was claiming capital allowances on in a normal way.

Wiseman was or is a supplier and distributor of milk and had lorries and milk churns that it was using day to day in its trade. The scheme that was produced, as Sir Lancelot Henderson said in his opening paragraph of his judgment, ‘These appeals concern a marketed tax avoidance scheme’, which is now a sort of standing joke in the Court of Appeal. If they start the judgment with words of that nature, you know perfectly well what's going to happen in the end.

If the second sentence is the appellant is a hedge fund manager, you don't need to read on anymore. Anyway, he said, these appeals concern a marketed tax avoidance scheme under which the two taxpayer companies sought to exploit the UK capital allowance legislation in a way which was designed to magically double their pools of expenditure on their existing plants and machinery qualifying for allowances without actually incurring any further expenditure. They could do so every three weeks again and again and again.

And this magic result was allegedly achieved by exploiting some extremely complicated provisions about long funding finance leases brought in in 2006. Having acquired this scheme, the two appellant companies entered into long funding finance leases or sales and leasebacks really. They carried on as using the plants and machinery day to day in the ordinary way, but technically they had sold for three weeks. They had sold the plant and machinery and were only lessees of that plant and machinery for the three weeks. The first year tribunal held that it would follow as night follows day, that one or other of various cross options would be exercised at the end of three weeks so that the full ownership of the plant and machinery would revert to Cape Altrad and Wiseman. So for three weeks, they were only the lessees.

The first year tribunal had no difficulty in holding that they had not ceased to own. Unfortunately, the upper tribunal, very experienced upper tribunal, as the Court of Appeal made clear, were persuaded that the taxpayers had lost legal and beneficial ownership of the assets when they sold them to the bank. And so there was a disposal.

The Court of Appeal, however, with great respect to the experienced first upper tribunal, said no. Within the meaning of section 61, they had not ceased to own the plant and machinery at any stage. The key case that the Court of Appeal relied upon in this context was a reaffirmation of Ramsay in a case called Hurstwood & Rosingdale, which was in 2021, which is not actually a tax case at all. It's a case about business rates avoidance. But it confirms that there is no limit to the basic purpose of interpretation that one should use. It isn't just a case for tax purposes.

What Sir Lancelot Henderson said at paragraph 36 of his judgment in Altrad is; This is not the occasion for a lengthy review of the case law and the Ramsay principle. There are two main reasons for this. The first reason is that in the most recent case on the subject to reach the Supreme Court, Rosingdale Borough Council and Hurstwood Properties, Lord Briggs and Lord Leggatt, with whom Lord Reid, Lord Hodge and Lord Kitchen all agreed, said that the Ramsay principle or doctrine may be said now to have reached a state of well-settled maturity.

They made clear that purpose of interpretation was the key and it would defeat the purpose of the legislation to let these people get away with it. They quote Judge Learned Hand in the American Gilbert case that was at the centre of Ramsay back in the day, saying that we cannot suppose that it was part of the purpose of the act to provide an escape from the liabilities that it sought to impose. If the taxpayer enters into a transaction that does not appreciably affect his beneficial interest except to reduce his tax, the law will disregard it.

Basically, that's now where we're getting to or have got to in tax avoidance schemes. So I can't really do much better than repeat what is said in the tax journal about Altrad back in July last year, just a few weeks after the decision came out. Saying we have moved a long way from the Duke of Westminster's successful reduction in surtax through a deed of covenant with his gardener. Many observers were surprised by the twist of events leading to the upper tribunal's apparent acquiescence in such an artificial arrangement, which fell little short of the goose with the golden egg. This decision resets the boundaries and will be a chill warning to anyone thinking of sailing close to the wind.

I think one thing from both our cases, both the cases we've focused on Hargreaves and Altrad, you might say they weren't sailing that close to the wind. In Hargreaves there was no other function for Houmet, as I've already said and in Altrad, David, they were only seeking to disavow ownership for a relatively short period. So these were perhaps both quite extreme examples.

And again, if you had facts that were similar, but arising in a slightly more commercial context where the person that wanted to have, in the case of Hargreaves, beneficial ownership or lose in the case of Altrad ownership, were willing to allow the other party a little bit more freedom or retain for themselves a little bit more freedom, then you would have a closer discussion or closer balancing act to decide whether you had beneficial ownership or had lost it. The other point from your case, or from both cases to emphasise, is that it's quite possible for nobody to have beneficial ownership. One can't start by assuming, well, someone's got to own this money beneficially.

That's true in law, probably, but it's not true when you're asking who's got beneficial ownership. It's capable for arrangements to be set up such that nobody has beneficial ownership. And in David's sort of case where you're asking whether you've lost beneficial ownership, that might be fine. In the Hargreaves sort of case where you want to assert beneficial ownership, that might be unfortunate. But speaking of contexts, Calypso, we've obviously been looking a little bit about where else these questions would come up. I'm not sure whether you want to mention one or two of those.

As has been flagged, probably the most obvious is withholding tax on interest payments. You can quite readily see why that arises, you know, referring to Section 933. There are other areas, not just in a domestic context, but in an international context. For example, double tax treaties look at beneficial ownership when it comes to dividend payments, also royalties.

Bearing in mind, you might need to adopt a different approach for each of those. In a domestic context, it is a common question. And you might have slightly different policy considerations in different cases. One obvious one are the various group relief provisions, which come up in all sorts of places. Group relief for Corporate Tax, CGT, substantial shareholding exemption, the group relief for stamp duty and SDRT depend on beneficial ownership or beneficial entitlement.

I think those are probably the main ones, aren't they? Cases where you're asking about who owns the interest, which is withholding and double tax, and who owns the shares, which can be so important for group relief.

Have things moved on at all since Sainsbury and O'Connor and Wood Preservation and Prior?

Well, I think the Court of Appeal would say in some ways, no, it's just that what may have changed is the understanding of those cases.

Sainsburys and O'Connor was what, 1991? I don't think they get away with it now.

I think that's true of a lot, isn't it?

I think so.

Things that people did in the 90s before Calypso and I were in practice, people wouldn't get away with now. And certainly the tax advice in Hargreaves now looks very optimistic, to put it mildly.

So Calypso, where do you think you draw the line in cases like this? I mean, for example, in Hargreaves, if the company had had other assets, which it might have used to pay the interest, but it used this one. So it wasn't inevitable that it would pay out this particular money to pay the interest.

I have wondered that myself. What would have happened if Humet had, say, kept the money for a week or something like that, put it on deposit, let's say, got some interest and then met their contractual obligation to pass the interest payments on? Would the tribunals and court have reached a different decision? On the one hand, I think if you're still doing that, because it's a highly artificial structure and you're doing that to fall within the Section 933 exemption, I feel a tribunal or court would struggle to say, yes, that's fine. I think that's what parliament intended. On the other hand, if Houmet has a genuine purpose for existing other than to pass interest payments on, then I can see an argument why maybe they would fall within Section 933.

Yes.

David, if it's not unfair, I'll ask you a similar question. Supposing someone's acquired assets, claimed capital allowances, and then they enter into a contract to dispose of them. But a little while afterwards, that contract, that agreement has to be rescinded or unwound for commercial reasons. Do you think the court will accept that despite the rescission, there was a loss of beneficial ownership in the meantime?

Well, I would hope that if you had convincing contemporaneous documentary evidence, that originally the plan was to hold on indefinitely, and then things changed, so you had to only cease to own for three weeks, that the court would accept that. But certainly in my recent experience, the Crown regularly cites a case called Gestmin, which warns the courts against accepting oral evidence in 2025 about events that happened in 2013, unless they'd had contemporaneous documentary evidence to support that. There are differing views on the strength of Gestmin and how strongly the tribunal should apply it.

But certainly in my recent experience, if you just turn up in court 10 years later and say, oh, actually, our plan was to hold on to this stuff indefinitely, but things changed and we had to sell within three weeks, the court are likely to be pretty sceptical of that, unless you can actually show something in writing at the time.

So to be on the right side of the line legally, you need to have the commercial factors. But from a practical point of view, you need to have the evidence.

Well, I'm afraid that's the way things have been in recent years, yes.

It probably won't come as a surprise to non-tax lawyers, but that may count as a change over the last 40 years that we've gone from the revenue agreeing facts to the revenue...

Being sceptical.

Being sceptical. And sometimes I think we have to accept rightly sceptical of the basis for these arrangements.

Thank you very much, Richard and Calypso. It seems that there are lots of cases which would be pretty clear following Hargreaves, as since it hasn't gone to the Supreme Court, as I said at the beginning, it's likely to be the last word for a few years anyway.

But clearly, there are other areas where it's very close to the borderline and it's really very difficult and you may need to ponder long and hard as to which side of that line you are on.

Well, thanks, David. I thought that was interesting. It's fertile ground, these distinctions around beneficial interest, beneficial ownership, beneficial entitlement, tax treaties, domestic legislation, capital allowances. And we had a little bit of everything.

Yeah, and I look forward to one day hopefully reading a case that comes along, which is one of those tricky borderline ones. And maybe we'll get an answer to what happens in those kinds of situations too.

Well, thanks, Richard and Calypso. As you say, that was very interesting. We wait with bated breath to see what the next Court of Appeal judgment comes out with.

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