Ensign Tankers (Leasing) Ltd v Stokes (Inspector of Taxes): HL 6 May 1992

The appellants entered into partnerships with a film production company. By doing so they intended to make available to themselves first year allowances on the capital expenditure incurred. Loan agreements protected them from any eventual loss.
Held: Money which had been spent mainly for trading had the benefit of the tax allowances whatever the motive behind for structure of the transactions. Even if a fiscal motive was the sole or paramount motive for a transaction, that would not deprive the action of its proper nature. The legal effect was of a trading transaction with a capital expenditure, and the case was remitted for consideration on that basis. A composite transaction which could fairly be described as involving a ‘conjuring trick’, artificiality and self-cancelling elements, should nonetheless not be called a sham, in the relevant sense.


Lord Goff of Chieveley


Gazette 06-May-1992, [1992] 1 AC 655, [1992] CLY 611, [1992] 2 WLR 469, [1992] STC 226


England and Wales


AppliedCraven (IOT) v White (Stephen); Inland Revenue Commissioners v Bowater Property Developments HL 1989
In Craven, the taxpayers owned shares in Q Ltd. In early 1976 they began to negotiate with C Ltd for a merger of the two companies and steps were taken to establish an Isle of Man holding company to act as a vehicle for the taxpayers’ shares should . .
CitedW T Ramsay Ltd v Inland Revenue Commissioners HL 12-Mar-1981
The taxpayers used schemes to create allowable losses, and now appealed assessment to tax. The schemes involved a series of transactions none of which were a sham, but which had the effect of cancelling each other out.
Held: If the true nature . .

Cited by:

CitedNew Angel Court Ltd v Adam (Inspector of Taxes) ChD 25-Jul-2003
The taxpayer company employed a subsidiary company through which it conducted its trade in land. It then sought to represent the profits from that subsidiary within its own accounts as trading profits for corporation tax purposes. The commissioner . .
CitedRevenue and Customs v Dempster (T/A Boulevard) ChD 24-Jan-2008
The revenue wished to refuse a claim to set off input tax for two transactions involving the alleged purchase of software. They said the transactions were a sham.
Held: The revenue’s appeal failed.
Briggs J said: ‘the critical question . .
Lists of cited by and citing cases may be incomplete.

Corporation Tax

Updated: 19 May 2022; Ref: scu.80334