Explainaway: the unallowable purpose test

In Explainaway, the First-tier Tribunal has given the first decision of a court on the application of the loan relationships' unallowable purpose rule. Unfortunately, this element of the decision is secondary to the main part of the decision which deals with the Ramsay approach to tax avoidance transactions. Taxpayers will be concerned that the brief decision relating to the unallowable purpose rule could be construed very widely. The decision on the tax avoidance scheme itself also casts further light on the prevailing approach of the courts in relation to tax avoidance transactions.