The following is a somewhat simplified description of transactions that would have occurred but for the withdrawal by Inland Revenue of an advance clearance:
- Investors purchased a leasehold interest in a property in a designated enterprise zone for 198 years from receiver-managers for the sum of £95 million, of which £64.125 million was borrowed on a 10-year full recourse and interest-bearing basis from a bank ("Hill Samuel"); the receiver-managers used £75.125 million of the amount received to pay a "reverse premium" to a subsidiary ("SQPL") of the promoter of the scheme ("Matrix") as the consideration for the previous agreement of SQPL to sublease the property for 99 years at a rent that, for the first 10 years of the sublease, was at an above-market rate; after payment of fees to Matrix and the funding of future construction costs, the receiver-managers retained £8 million of the £95 million received by them;
- SQPL lent £64.125 million to a subsidiary of Hill Samuel which, in turn, lent that sum to Hill Samuel; the balance of £8 million received by SQPL was used to pay a fee to Hill Samuel in respect of its guarantee of SQPL's obligations under the 99-year sublease, and to make a deposit with the subsidiary of Hill Samuel;
- rent for the initial 10 years under the 99-year sublease by SQPL was used to fund the interest payments owing by the investors on their loan from Hill Samuel; and
- an "exit arrangement" effectively permitted the investors after 10 years to cause the arrangement to be unwound at that time.
In finding that the scheme, if implemented, would not have entitled the investors to claim capital allowances on the full £95 million supposedly paid by them, Lord Templeman stated (p. 94)):
"The sum of £64.125m required to make up the fiscal price will never be paid by Hill Samuel and its subsidiary, by the trustee, the receiver and SQPL in such a manner that each receipt is matched by an equal and pre-ordained immediate payment. The circular payments are self-cancelling."
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