Bona fide commercial purpose and tax advantage test turns on overall intention in connected transactions

Transactions in securities fall within the statutory exception where they are entered into for bona fide commercial reasons and not with tax advantage as a main object. The assessment depends on the object and intention behind the series of transactions viewed as one connected arrangement, rather than by isolating individual steps. On the facts, the Commissioners were entitled to infer that the dominant purpose was to preserve the company, not to secure a tax advantage, and the conclusion was supported by evidence. The exception was therefore satisfied and section 28 did not apply.

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Issues: Whether the transactions in securities were carried out for bona fide commercial reasons and whether none of them had as their main object, or one of their main objects, the enabling of a tax advantage under section 28(1) of the Finance Act, 1960.

Analysis: The finding whether the statutory exception is satisfied depends on the object and intention behind the series of transactions, viewed in their real and connected setting. The Commissioners were entitled to treat the arrangement as a whole and to infer, on the evidence, that the dominant purpose was to preserve the company and not to secure a tax advantage as a main object. The issue was essentially one of fact, and there was evidence supporting the conclusion reached.

Conclusion: The statutory exception was satisfied and section 28 did not apply.

Ratio Decidendi: Where a statute turns on whether a transaction was effected for bona fide commercial reasons and without tax advantage as a main object, the question is predominantly one of fact and intention, to be determined from the whole connected arrangement rather than by isolating individual steps.

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