A company created a new class of preferred shares which it issued credited as fully paid to its two shareholders. They sold the shares to a purchaser on terms that the price was to be paid by instalments. Under arrangements made between the parties the company paid dividends on the shares which were paid into the purchaser’s bank account. Corresponding sums were then paid out of the bank account to the shareholders in payment of the purchase price for the shares. By this means the shareholders converted dividends, which would have been taxable in their hands, into instalments of the purchase price for their shares, which were not. The problem was again one of timing. The arrangements were made before the enactment of the Finance Act 1960, but the payments were made after it. The Revenue did not contend that the declaration and payment of a dividend by itself was a transaction in securities. Its contentions were more modest. It did not focus its attention on the dividends. It claimed that the payment of the instalments of the purchase price, or the completion of the sale by such payment, was such a transaction. All members of the Committee accepted the Revenue’s contention that the contract of sale, which was clearly a transaction in securities, was not carried out until the instalments of the purchase price were paid. Four members of the Committee also agreed that the payments of the instalments of the purchase price were themselves transactions in securities in consequence of which a tax advantage had been obtained. Lord Simon thought that the payments of the dividends were the transactions in securities in consequence of which the tax advantage was obtained. Lord Reid agreed with him but did not rest his conclusion on this ground. Lord Guest was equivocal on this point; while Lord Wilberforce expressly reserved his position.
Judges:
Lord Reid, Lord Morris, Lord Guest and Lord Simon
Citations:
[1972] AC 109
Jurisdiction:
England and Wales
Cited by:
Cited – Inland Revenue Commissioners v Laird Group plc CA 30-Apr-2002
The taxpayer had sources of foreign income. Arrangements were made to take the benefit through the payment of interim dividends, which it intended to use to set off against liability for advance corporation tax. The Commissioner contended that these . .
Cited – Her Majesty’s Commissioners of Inland Revenue v Laird Group plc HL 16-Oct-2003
Was the payment of a dividend in respect of shares ‘a transaction in securities’ or ‘a transaction relating to securities’ within the meaning of section 703.
Held: ‘As a matter of ordinary language, the creation, issue, sale, purchase, . .
Cited – John Mander Pension Trustees Ltd v Revenue and Customs SC 29-Jul-2015
The pension scheme had been approved, but that approval later withdraw. HMRC issued assessment for the years in which it had been approved. The taxpayer argued that such assessments applied to the date with effect from which the approval is . .
Lists of cited by and citing cases may be incomplete.
Taxes Management
Updated: 06 May 2022; Ref: scu.182902
