Husband and wife had been shareholders in a company, the wife being recorded as company secretary. The company paid dividenceds to both. The husband appealed a decision that the payment to his wife was by way of a settlement and was taxable in his hands.
Held: The appeal succeeded. ‘there can be no doubt but that the arrangement was or included the acquisition by Mrs Jones of her share in the Company. Equally there can be no doubt that that acquisition on its own was for full value in the context of a joint business venture to which both parties made substantial and valuable contributions’ The court distinguished all the earlier cases. ‘In the absence of any service agreement between the Company and Mr Jones I am unable to accept that the payment of modest salaries to Mr Jones was any part of the arrangement. Similarly the declaration of the dividends was not arranged in advance; it was dependent on the trading fortunes of the Company.’ There was no settlement as defined in this case.
Judges:
Lord Justice Keene Lord Justice Carnwath The Chancellor of the High Court
Citations:
[2005] EWCA Civ 1553, Times 03-Jan-2006, [2006] 1 WLR 1123
Links:
Statutes:
Income and Corporation Taxes Act 1988 660G(1)
Jurisdiction:
England and Wales
Citing:
Cited – Inland Revenue Commisioners v Leiner 1964
An interest free loan was made to an associated company from the taxpayer’s mother which was then replaced by another interest free loan from the taxpayer. The circle of loans included an interest bearing loan to the taxpayer from the trustees of a . .
Cited – Bulmer v Inland Revenue Commissioners 1967
Shareholders fearing a takeover sold their shares to another company’s subsidiary at below market value, the balance of value outstanding on an interest free loan. A commercial loan was used to buy further shares. When the loan was fully repaid the . .
Cited – Inland Revenue Commissioners v Plummer HL 1-Nov-1979
Although transactions were integrated as part of a preconceived scheme which was commercially marketed and that had no other conceivable purpose than that of saving surtax, the construction of the statute compelled the acceptance of a fiscal result . .
Cited – Chinn v Hochstrasser (Inspector of Taxes) HL 11-Dec-1980
The House considered the meaning of the word ‘bounty’ in an income tax context, where it had been used by the courts: ‘My Lords, I would venture to point out that the word ‘bounty’ appears nowhere in the statute. It is a judicial gloss upon the . .
Cited – Copeman v Coleman 1939
A company had been formed to take over the taxpayer’s business. He held the shares equally with his wife. Later the company created a class of preference shares of andpound;200 each carrying a fixed preferential dividend, the right to vote if such . .
Cited – Commissioners of Inland Revenue v Payne CA 1940
The taxpayer covenanted to pay an annual sum to a company controlled by him for his life or until it was wound up. He claimed to deduct the amount of the covenant in the computation of his total income for surtax purposes. The Revenue refused his . .
Cited – Crossland v Hawkins CA 1961
The taxpayer, a well known film actor, agreed to work through a company for three years being paid andpound;50 per week. The shares were transferred to his wife and accountant. His father in law set up a andpound;100 settlement for the benefit of . .
Cited – Mills (Hayley) v Commissioners of Inland Revenue HL 12-Feb-1974
Surtax – Settlement – Arrangement – Settlor – Fees for actress’s services paid to company but enuring for her benefit – Actress aged 14 when arrangements made – Settlement with more than one settlor – From whom income originates – Income Tax Act . .
Cited – Butler v Wildin 1988
Two brothers acquired a company and were the sole directors. 19 shares each were acquired by the children with their own money. Two later born children also acquired 19 shares therein with their own money from their respective fathers and others, . .
Cited – Butler v Wildin 1988
Two brothers acquired a company and were the sole directors. 19 shares each were acquired by the children with their own money. Two later born children also acquired 19 shares therein with their own money from their respective fathers and others, . .
Cited – Young v Pearce 1996
The company created a special class of preference shares and allotted them to the wives of the two shareholders and directors. When substantial preference dividends were paid to the wives, the husbands were assessed to tax on them. They conceded . .
Appeal from – Jones v Garnett (Inspector of Taxes) ChD 28-Apr-2005
The taxpayer worked as an information technology specialist. His earnings were channelled through a limited company. The company paid on part of its income to his wife, with the result that the total tax paid was reduced. The inspector sought to tax . .
Cited by:
Appeal From – Jones v Garnett (Her Majesty’s Inspector of Taxes) HL 25-Jul-2007
The husband and wife had each owned a share in a company which sold the services of the husband. The Revenue claimed that the payment of dividends to the wife was a settlement.
Held: The Revenue failed. The share had been transferred to the . .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 04 July 2022; Ref: scu.236378