Substance over structure—The Ramsay Principle defeats ‘Aikido’ scheme (Clipperton and another v HMRC)

Article summary

Private Client analysis: The Court of Appeal (CA) upheld the decision of the first and upper tax tribunals that income received through the Aikido scheme was taxable in the hands of the appellants, Mrs Clipperton and Mr Lloyd. The CA applied the Ramsay principle and confirmed that the distribution made by the company was intended to, and did, reach them as owners despite the additional intermediary steps taken. Additionally, the court ruled that the settlements code did not apply to the distribution. When applying the Ramsay principle, the distribution was from the company directly to the appellants, making the trust distribution irrelevant for these purposes. Contrary to the appellants' argument invoking the Khan case (Khan v HMRC), the court held that Khan dealt with a different question and did not bind this case. The CA affirmed the lower tribunals' decisions and dismissed the appeal. Written by Jacob Ashforth, solicitor, and Ronnie Myers, director at Burges Salmon.