Sec. 56 (2) of the Stamp Act 1891 provides as follows:-‘Where the consideration, or any part of the consideration, for a conveyance on sale consists of money payable periodically for a definite period exceeding twenty years or in perpetuity, or for any indefinite period not terminable with life, the conveyance is to be charged in respect of that consideration with ad valorem duty on the total amount which will or may, according to the terms of sale, be payable during the period of twenty years next after the day of the date of the instrument.’
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By an agreement by which a company’s business was sold it was provided that part of the consideration payable to the sellers was to be the annual payment out of profits of a sum equal to a dividend of 3 per cent. on the amount for the time being paid up on such of the original ordinary share capital in the new company as should for the time being have been issued; such payment was however postponed to the payment of a cumulative annual dividend of 5 per cent. to the ordinary shareholders. At the date of the agreement the whole ordinary share capital had been issued, but only about a quarter of it paid up.
Held that under sec. 56 ad valorem duty fell to be paid on a sum representing 3 per cent. on the amount of ordinary share capital paid up at the time of the agreement (that being ‘money payable periodically . . in perpetuity, or for an indefinite period . . ‘) multiplied by twenty, and that it was immaterial that the amount payable periodically was subject to the contingency of there being sufficient funds to pay the 5 per cent. dividend.
Per Lord Lindley-‘There is nothing in sec. 57 which either cuts down or excludes sec. 56.’
Judges:
Lord Chancellor (Halsbury), Lords Robertson and Lindley
Citations:
[1905] UKHL 576, 43 SLR 576
Links:
Statutes:
Jurisdiction:
England and Wales
Stamp Duty
Updated: 26 April 2022; Ref: scu.621200