The share owners placed half of the issued shares in the company in trust for the taxpayer, in order to persuade him to continue his involvement in the family company as an active director. The trust provided that the income from the shares should be paid to him for ‘so long as he shall be engaged in the management of the co.’ In default the shares would pass to other family members. He sought to be taxed on the basis that the dividend income received through the trust was remuneration from his office or employment as managing director and was earned income. The taxpayer claimed entitlement to earned incoome relief, and the General Commissioners agreed with him.
Held: The revenue’s appeal failed. The test of whether the income from the entrusted shares constituted earned income was whether, in the hands of the recipient, it was income earned as a reward for his services. There was ample evidence that this was the case here.
Citations:
[1965] 1 All ER 692, [1965] 1 WLR 508, 109 Sol Jo 177, 42 TaxCas 291, [1965] TR 9, 44 ATC 6
Statutes:
Jurisdiction:
England and Wales
Cited by:
Cited – HM Revenue and Customs v PA Holdings Ltd CA 30-Nov-2011
The company made available to certain employees discretionary annual bonuses which were paid instead by way of shares and received dividends. It now appealed against findings that the payments were taxable subject to Schedule F rates and were liable . .
Cited – Morgan v Department for Employment and Learning NIIT 24-Jan-2014
. .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 11 May 2022; Ref: scu.601947