Taxpayer’s scheme to create artificial loss and reduce capital gains tax deemed tax avoidance transaction

Court of Appeal determines that a complex financial arrangement, designed to generate an artificial loss to offset against capital gains, constitutes a tax avoidance transaction under statute. The taxpayer's scheme involved a series of transactions with connected entities, exploiting deeming provisions to reduce capital gains tax (CGT) liability. The court found that the scheme was not undertaken for any commercial purpose but solely to gain a tax advantage, thereby misusing and abusing the CGT relief provisions. The original decision of the Appeal Commissioner, which had allowed an actual loss incurred during the transaction, was upheld as just and reasonable. Additionally, the Notice of Opinion issued by the Revenue Commissioners, despite containing a misdescription of one transaction step, was deemed valid as the error was not material to the tax avoidance nature of the scheme.