IRD has a new weapon – what did Parliament contemplate! Given that Inland Revenue writes the law and advises Parliament and MP’s don’t have a clue – arguably Parliament contemplated what ever Inland Revenue contemplated. So logically, if Inland Revenue doesn’t like what a taxpayer does with the law it recommends to Parliament and writes – it will yell TAX AVOIDANCE! Unfortunately – if it yells – the Courts will generally agree.
This was the basis of the decision in Penny & Hooper where the Supreme Court confirmed that schemes and arrangements entered into with the purpose of avoiding tax although structurally correct are still caught by the anti avoidance provisions of the Income Tax Act.