If G. S. A. Wheatcroft initiated the academic teaching of tax law in UK universities, then John Tiley ensured its continuation. Professor Tiley has been the face of UK academic tax law for the past thirty years, both in domestic and international arenas. At home he has dealt with other law teachers who were dubious about the role of taxation in the curriculum, with the professions and with government. At an international level he has ably represented the UK in gatherings of tax teachers. It seems inconceivable that he will cease making a contribution to teaching and writing on his retirement, but this marks a suitable point at which to assess the position we have reached with tax teaching in the UK and to consider the future.

In his own fascinating survey of the development of UK tax law teaching, ‘50 years: Tax, Law and Academia’, written to celebrate the fiftieth anniversary of the British Tax Review, Tiley concluded the state of the tax academy is mixed and that, whilst –

It is hard to argue with his conclusion without seeming complacent (and complacency would certainly be misguided) but Tiley is over-modest in his article about his own contribution and about the progress he has fronted over the last two decades.

Introduction

In the realm of taxation, has the incorporation of the European Convention on Human Rights (hereafter ‘the Convention’) into United Kingdom domestic law by the Human Rights Act 1998 been all ‘fuss and bother’? Now that almost ten years have passed since the 1998 Act, what answer should one give to the question posed by Professor Tiley in 1998?

This short chapter cannot possibly seek to assess the impact of the European Convention on Human Rights on all aspects of the UK taxation system. Rather, this chapter seeks to examine only a narrow area: that is the impact of the Convention on the taxation of the family or, more correctly, how the Convention has been applied in tax cases involving personal and family status before the European Court of Human Rights. Taxation and the family is, of course, a particular area of interest of Tiley, and, as will be seen below, some of his comments on the discriminatory nature of UK tax provisions have proved to be quite prophetic.

Introduction

More years ago that either us would probably wish to call to mind, John Tiley taught me matrimonial law at Cambridge. He was a new fellow at Queens' and as a then first year student at Sidney Sussex I have a favourable recollection of his lectures even though the elements of family law that he taught me have barely impinged upon my professional career (and thankfully not at all upon my private life).

In those days I suspect that neither of us knew more about tax than what little we gleaned from the leading cases that tax issues had provided in the field of equity and the law of trusts and in other branches of the law. At some stage, and no doubt by different means and for different reasons, we were both drawn into the murky and unprincipled world of taxation. From there Tiley has risen to become the UK's foremost tax law professor and I have had the great pleasure of coming to know him through our shared interest in the subject.

Within the tax field Tiley has sought in particular to cast light on the difficult topic of tax avoidance. Among his many contributions to the British Tax Review on that topic is an article on the development of the case law since Ramsay and a case note on what have become known as the BMBF and SPI cases.

Introduction

John Tiley's breadth of interests and scholarship in matters of taxation is a disappearing art but makes it easy for friends to find starting points in his work for their own specialist eccentricities. History is fascinating to John and for a UK scholar working with the oldest income tax in the world, it is probably obligatory. Old income tax systems are generally schedular in nature and with schedules come many borderlines to draw; John has done his tours of duty surveying these borders, including the ones to be explored here. More to the point, John always wants to ask not only what the law is and where it came from but ‘Why?’. He has visited many other parts of the world in pursuit of solutions to why. Happily for me, his travels brought him to Sydney Law School to see our uncommon friend, Ross Parsons.

So an international cocktail is appropriate to celebrate Tiley's work and this one will mix the history of the tax treaty rule on royalties up to the emergence of the modern form, the borders of the provision and the fundamental question of ‘Why?’ we have it (viewed from an historical perspective). In the modern context of the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention on Income and on Capital, with zero taxation at source on royalties, the ‘Why?’ is indeed a mystery.

Introduction

John Tiley's first experience of tax was updating Beattie's Estate Duty and his most recent article is on the history of death duties. I want to continue that topic and look at inheritance tax in the light of the proposals of the Meade Committee, on which I had the privilege to serve, knowing Tiley's enthusiasm for recommending the Committee's Report to his students. My timing is bad, as the ‘Mirrlees Review’, popularly known as Son of Meade, is currently in progress. I am glad that the topic of inheritance taxes is still on the Review's agenda, in spite of the international trend away from such taxes, and indeed it received a boost in Professor Alan Auerbach's IFS 2006 annual lecture, given on the same day as the launch of the Mirrlees Review.

Introduction

The author's personal relationship with John Tiley begins with the reading of his writings on tax avoidance some twenty years ago. Having returned to Germany from a three-month stint with City law firm Herbert Smith, I felt the necessity to keep my knowledge of UK law (and – even more important for a continental lawyer – of English legal terminology) updated. Respectfully, I resorted to the British Tax Review and the first piece I ever read in this prestigious journal was Tiley's masterly analysis of common law cases on tax avoidance. I got stuck with the writer and his topic (and the journal) immediately and followed his work (at least insofar as it was published in sources available on the other side of the Channel) during the following years. The first time I started to build my own thoughts on these writings occurred in 1995, when I gave a lecture on tax avoidance and EC law at Bonn University which ventured to set out a common understanding of tax avoidance both from a comparative view of Member States' legal approaches to tax planning and from an autonomous interpretation of EC law. Seven years later, I added a second piece to this mosaic which dealt with the concept of abuse in the ECJ's company law cases. Unfortunately, these presentations were not published in English.

Introduction

My first piece of academic research on being appointed to a Lectureship in Taxation at Cambridge, where I taught with John Tiley, concerned the extent to which the law of taxation could be supplemented by the common law of unjust enrichment. This was prompted by the decision of the House of Lords in Woolwich Equitable Building Society v IRC, which recognised a common law right to restitution of taxes. Over the subsequent fifteen years, the law of unjust enrichment has developed dramatically, and one of the main contexts for that development has concerned the recovery of taxes which were not due to the Revenue. This has recently reached its highpoint in the context of the extensive litigation arising from the decision of the ECJ that part of the UK tax legislation was discriminatory and consequently the national court had to provide remedies for those taxpayers who had paid taxes which were unlawfully paid to the Revenue. Now is an opportune time to review this litigation and to reassess the modern interrelationship between the law of unjust enrichment and the law of taxation.

At the heart of any claim for the restitution of taxes is the fundamental proposition that the state can only demand the payment of tax where it is lawfully authorised to do so. The Revenue can be considered to have received tax unlawfully for a variety of different reasons.

Introduction

This book has been structured along the lines of two themes that (amongst others) inspire the writings of John Tiley. The first of these themes, avoidance, essentially involves using tax law in a manner that is contrary to legislative intent. The second of these themes, taxation of the family, involves proper identification of the tax subject and so is one of the fundamental structural features of the income tax. It is, therefore, not surprising that John is interested in a case such as Jones v Garnett, which involves something of an intersection between these two themes. Jones v Garnett involves the family business with, like so many avoidance cases, an artificial entity (a company) inserted between the business and the family members. This paper takes a conceptual and retrospective look at the taxation of the family company and how it may be and has been used to determine the allocation of income to the tax subject identified by the legislature.

Jones v Garnett is in many ways a classic fact pattern for a family company. Two family members (Mr and Mrs Jones) owned equally the shares in a private company, Artic Systems Ltd. They both worked for the company but unequally, Mrs Jones working as an administrator for around five hours per week. Both drew small wages, particularly Mr Jones. In accordance with tax advice, they relied for their family income on the distribution of dividends not wages.

It is a real pleasure and a privilege to have prepared this foreword to a collection of essays honouring John Tiley as he nears retirement from the chair in Taxation Law at Cambridge University. The essays have been prepared by some of the most insightful writers on tax of recent times, all of them friends of John and some of them former students. In the paragraphs that follow I have described my personal experience of John, set out to say something about his achievements as one of the leading tax thinkers of modern times and then attempted to reveal something of the man that may not be readily apparent from his writings.

I first met John in the foyer of the Cambridge Law Faculty. As I walked in, he recognised me immediately – I still do not know how – and I realised that I was with the person who had been influencing my understanding of tax from the very first days of my career in the Inland Revenue.

In the second half of the 1970s, the Inland Revenue training regime for graduate entry tax inspectors was demanding, with a pass mark in internal examinations of 70 per cent. Tax cases had to be learnt by rote, which came hard after several years spent in research and university teaching. For a while, tax seemed a lot less stimulating than Cicero's speeches or letters.

Introduction

There is an inverse relationship between quantity and quality with respect to many things, including writing about tax avoidance. Everyone working in the tax area has views about tax avoidance and almost everyone, it seems, feels an irresistible urge to inflict these views on others. Most of the writing on tax avoidance is in the nature of fast food: quickly prepared, consumed, digested and forgotten – and, if consumed in excessive quantities, dangerous to your (mental) health. In a fast-food world, master chefs are revered and celebrated. Professor John Tiley is a master chef with respect to offerings about tax avoidance. His writings about controlling tax avoidance constitute the fine-dining experience, the Michelin three-star restaurant in a world of greasy spoons, chains and all-you-can-eat buffets. It is fitting that we celebrate his contributions.

The subject of my paper is a comparison of a statutory general anti-avoidance rule and judicial general anti-avoidance doctrines as methods of controlling tax avoidance. The paper assumes, fairly I think, that specific statutory anti-avoidance rules and limited judicial anti-avoidance doctrines such as sham are necessary but not even nearly sufficient to deal effectively with tax avoidance. The issue can be framed in a number of ways.

Introduction

It is risky, foolhardy even, to contribute an essay on anti-avoidance issues to a collection honouring John Tiley. No one deserves to be honoured more than John, of course, and anti-avoidance doctrine is one of his specialties. But what can I write that he does not already know or that he could not say more elegantly?

In fact, Tiley knows more than I do about everything (except maybe – maybe – baseball), and that includes American tax law. In a project Tiley undertook while visiting Case Western Reserve University in 1985–86, he studied anti-avoidance doctrines developed by US courts. In the resulting trilogy of articles in the British Tax Review, Tiley not only educated British lawyers about US law (and argued against unthinking importation of that law into the UK); he also forced those of us in the colonies to reconsider our instinct that substance should generally trump form. The US and the UK have different views about the relative importance of substance and form, and John was unconvinced that his home country had the worse of the arguments.

In Chapter 3 of this volume, Marty McMahon discusses the evolution of judicial anti-avoidance theory. I will make reference along the way to the judiciary, which has played such an important role in American anti-avoidance jurisprudence, but the focus of this essay is different. I examine statutory and regulatory developments that are changing American anti-avoidance law – with the hope that something here is new to Tiley.

Introduction

Both the UK and the US have extraordinarily detailed revenue laws, although they differ in structure. The UK income tax is schedular, while (with some exceptions) the US federal income tax tends to a global computation. In both countries, the complexity of the statutes, which is itself intended to reduce ambiguity and tax planning opportunities, in fact often gives rise to unintended tax planning schemes.

As John Tiley so cogently notes in his magnificent treatise, Revenue Law, ‘[n]o legislature can allow taxpayers to continue to arrange their affairs in such a way that the tax system becomes voluntary (pay the Revenue or pay an advisor) …’ Yet in both the US and the UK, the statutory pattern is such that taxpayers frequently arrange transactions to fit literally the statutory language with the goal of reducing the tax burden on the particular transaction or even to create an apparent loss that might be offset against income from other transactions in calculating their income tax liability. This behaviour creates a dilemma for the legislature, the tax administrators, and the courts, because, as Tiley also notes –

The judiciary in both the UK and the US must constantly grapple with this tension in interpreting and applying the revenue laws.

I was pleased and honoured to be asked to write a foreword to this collection of essays in honour of John Tiley, an old friend and respected colleague. Both the substance of the contributions in the collection and the status of the authors show the esteem in which the international tax community holds John.

It is appropriate that the title of the collection involves comparative perspectives on revenue law, as John's scholarship and academic activities were centred on comparative interests. He has been a visiting scholar at many foreign institutions, particularly in the US and France, and that experience gave a depth and substance to his comparative writing. In the other direction, he was the point of reference for all comparative work which deals with UK law. He was a welcoming host to many visiting scholars who made Cambridge a necessary stopping point in their scholarly travels. (And further he endeared himself to his international colleagues by writing a very useful essay on the double tax problems faced by travelling academics.)

John brought a unique style and approach to writing about tax law. As Brian Arnold puts it in the culinary metaphor with which he introduces his contribution to this collection, John Tiley is a ‘master chef’ when it comes to tax law scholarship. His offerings are many and varied and always have a special flavour.