Inland Revenue Commissioners v Joiner: HL 26 Nov 1975

HL Surtax – Tax advantage – Transaction in securities – Company recon- struction – Surplus assets o f old company distributed in voluntary liquidation – Agreement for liquidation providing for agreed methods o f valuation and distribution – Whether (a) whole scheme o f reconstruction, (b) liquidation agreement, (c) distribution in liquidation a transaction in securities – Whether tax advantage a consequence o f any transaction but the liquidation – Income and Corporation Taxes Act 1970 (c. 10), ss. 460 and 46
The phrase ‘a transaction in securities’ does not include the liquidation of a company. Taxpayers entered into a shareholders’ agreement which varied the rights attached to their shares in important respects before putting the company into liquidation. The variations were all necessary steps in order to achieve the taxpayers’ objective, which was to receive the undistributed profits of the company as surplus assets in the liquidation (and therefore free of surtax) while keeping the business itself in existence. The Court of Appeal had held that the liquidation by itself was a transaction in securities. The Revenue did not contend that a straightforward liquidation without any variation of the rights attached to the shares was a transaction in securities, and the House did not hold that it did. All members of the Committee rested their decision on the ground given by Goulding J at first instance, that the variation of rights constituted a transaction in securities and that accordingly the tax advantage was obtained in consequence of the combined effect of a transaction in securities and the liquidation of a company.
It is a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
Lord Diplock discussed the nature of a consolidating Act: ‘The purpose of a consolidation Act is to remove this difficulty by bringing together in a single statute all the existing statute law dealing with the same subject-matter which forms the general context in which the particular provisions of the Act fall to be construed, so that it will no longer be necessary to seek that context in a whole series of amended and re-amended provisions appearing piecemeal in earlier statutes.
This is the only purpose of a consolidation Act; this is the only ‘mischief’ it is designed to cure. It is true that a consolidation Act is not intended to alter the law as it existed immediately before the Act was passed, but to treat this absence of intention as justifying recourse to the previous legislation repealed by the consolidation Act in order to ascribe to any of the provisions of that Act a meaning different from that which it would naturally bear when read only in the context of the other provisions of the consolidation Act itself, would be to defeat the whole purpose of this type of legislation-to allow the absence of a tail to wag the dog.’

Lord Wilberforce, Viscount Dilhorne, Lord Diplock
[1975] 1 WLR 1701, [1975] UKHL TC – 50 – 449, 50 TC 449, [1975] STC 657, [1975] TR 257, [1975] 3 All ER 1050, [1975] TR 77
Bailii
Finance Act 1960 28
England and Wales
Cited by:
CitedInland 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 . .
CitedInland Revenue Commissioners v Sema Group Pension Scheme Trustees CA 19-Dec-2002
The taxpayers appealed a notice under section 703(3) to counteract the tax advantage received by them from a share buy-back scheme. The scheme was an approved pension scheme, under which the quoted company agreed to buy back its own shares.
CitedHer 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, . .
CitedCantrell v Wycombe District Council CA 29-Jul-2008
The appellant had bought a house at auction. It had previously been sold by a local authority subject to a covenant by the buyer allowing the authority to nominate tenants. The covenant was said to be binding on successors in title, and was . .
CitedScottish Widows Plc v Revenue and Customs SC 6-Jul-2011
The taxpayer insurance company had transferred sums from accounts designated as Capital Reserves. The Revenue said that these were properly part of the profit and loss accounts for the respective tax years, and chargeable receipts.
Held: The . .

Lists of cited by and citing cases may be incomplete.

Income Tax, Constitutional

Leading Case

Updated: 09 November 2021; Ref: scu.180845