Recent tax cases – a purpose or not a purpose?

I was recently reflecting on a number of recent tax cases that have been through the courts. The term “purposive” has come into the English language (well, certainly that used by tax practitioners) in recent years. Put simply, it means the movement in recent years by the courts to look at the purposes behind a transaction or series of transactions rather than simply look at the facts on the face of things. These recent cases highlight a number of important principles.

First, the courts can read specific words into legislation where they perceive that there are clear drafting errors. On the face of it this seems sensible, but is it really right for the courts to second guess the intent of Parliament as evidenced by parliamentary draughtsmen in writing the legislation? There is some caution, though, in that the courts have also said that they will not read significant provisions into legislation if it is not clear that it was the intention of Parliament. But isn’t this slightly contradictory? I have always said that it is not the court’s job to write legislation; only to interpret it.

Secondly, the courts may take a restrictive interpretation than might be expected, so as to try and keeping within the presumed intention of Parliament, and deeming provisions should be viewed in exactly the same way as statutory provisions

But, purposive interpretation is not just one way. It’s doesn’t just work in the favour of HMRC but can be used in favour of the taxpayer

So where does this leave us now? My own view is that we are only starting out on the long hike to the summit of Mount Purposive. We’re probably not much past base camp. We’re clear of the trek ahead of us, but just with climbing any mountain, the route is unpredictable and can be dangerous. Whilst tax payers remain the unpredictable wind and terrain, it would be dangerous to finalise the ultimate route just yet.