Brian George Foulser & Anor v MacDougall (Officer of HM Revenue & Customs)

For the purposes of section 167(2) of the Taxation of Chargeable Gains Act 1992, section 286(7) is not confined to the machinery in section 286(5) and (6). It may establish a connection between a non-resident company controlling a transferee and the transferor. Acting together to secure or exercise control may include an arrangement in which one person holds the shares and agrees to exercise control in accordance with another’s wishes. The word secure is not necessarily limited to safeguarding existing control. A new point on an appeal from a fact-finding tribunal should be entertained only where the necessary primary facts have been found and only one conclusion is possible. An evidence-dependent Article 43 argument was therefore not entertained.

The appellants challenged amendments to their self-assessments which denied hold-over relief under section 165 of the Taxation of Chargeable Gains Act 1992 following a tax-avoidance scheme involving gifts of shares to United Kingdom companies held within Irish Life insurance bonds.

The special commissioner dismissed the appeals: [2005] UKSPC SPC00462. The High Court dismissed the appeal: [2005] EWHC 2958 (Ch). Before the Court of Appeal, the appellants sought permission to raise new statutory-construction points concerning section 286(7), and challenged the treatment of an Article 43 EC Treaty argument. The central issues were whether the new points could be raised and whether section 286(7) could establish the required connection under section 167(2)(b).

1. Disposition. The appeal was dismissed. Permission was granted on the first ground only to the extent of the statutory-construction point concerning section 286(7). Permission was refused on the proposed challenge to the special commissioner’s factual findings. The permission previously granted on the Article 43 point was discharged, and the proposed reference to the Court of Justice was refused.
2. New points on appeal. An appeal from a fact-finding tribunal is confined to questions of law and the appellate court must not trespass on the tribunal’s fact-finding role. A new legal point should not be entertained unless the tribunal made all primary findings needed to decide it and, on those findings, the only proper conclusion is the one advanced. The usual practice concerning a pure point of law, described in Pittalis v Grant [1989] 1 QB 605, cannot be applied without qualification where the point requires facts to have been found in a particular legal context. Those conditions were not satisfied for the second section 286 point.
3. Section 286(7). Section 286(1) requires questions of connection to be determined under the following subsections. Section 286(7) contains no restriction confining it to sections 286(5) and (6). Its wording permits it to operate in an enquiry under section 167(2)(b), where the question is whether the person controlling the transferee company is connected with the transferor. The contrary argument was rejected.
4. Meaning of control. The court stated, obiter, that secure should not necessarily be confined to safeguard or retain. The phrase acting together to exercise control may cover a case where one person has shareholder control but agrees to exercise it in accordance with another person’s wishes. The Court of Appeal’s observations in Steele v EVC International NV [1996] STC 785 were treated as consistent with that broader approach.
5. Article 43 EC Treaty. The Article 43 argument was not a pure point of law. Whether the arrangement restricted freedom of establishment depended on the evidence, including the terms of the bond and Irish Life’s role. The special commissioner had refused to entertain the point on proper case-management grounds, and there was no successful appeal from that ruling. It should therefore not have been entertained by the High Court or this court. The court did not decide the merits. It added, obiter, that any deterrent effect would more naturally concern freedom to provide services than freedom of establishment.
6. Reference. The proposed question was unsuitable because the stated facts did not themselves establish the domestic-law connection required by section 167(2)(b). That issue was for the domestic court, and no reference was necessary.

1. Court of Appeal (Civil Division) dismissed the appeal, limited permission on the first ground, discharged permission on the Article 43 point and refused a reference to the Court of Justice.
2. High Court of Justice, Chancery Division dismissed the appeal from the special commissioner: [2005] EWHC 2958 (Ch).
3. Special Commissioners dismissed the appellants’ appeals against the amendments to their self-assessments: [2005] UKSPC SPC00462.