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This request relates to two sets of anti-avoidance rules.

• The first set of rules is the rules (in Chapter 2 Part 13 of the Income Tax Act 2007) which charge a UK resident individual to UK income tax on income arising from assets which are transferred to a person abroad where the individual retains rights to enjoy that income or to benefit from it in some way.

• The second set of rules is the rules (in section 13 Taxation of Chargeable Gains Act 1992) which charge certain UK resident participators in a closely-held overseas company to UK tax on capital gains which accrue to the overseas company.

These rules are an important part of the UK's defences against the diversion of income and capital gains to overseas companies (and other entities) where they may attract tax, if any, at rates which are much lower than the prevailing UK rates. They have a similar effect in the individual tax context to the controlled foreign company (CFC) rules which have, of course, also been subject to challenge on EU law principles.

If the UK Government is to defend the current rules, it will have to show either that rules do not represent an infringement of the EU Treaty freedoms - which seems unlikely - or that the two regimes represent a justifiable and proportionate restriction on those freedoms. The case law suggests that the prevention of tax avoidance can be a justification for an infringement of EU freedoms, but the argument about whether or not these regimes are a proportionate response may be more difficult, particularly in the context of the chargeable gains rules (in section 13) to which there is currently no defence for commercial transactions.

So the EU rides to the defence of tax avoiders. What next? Votes for prisoners?

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