Canada Safeway Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Date | 1972 |
| Court | Chancery Division |
Revenue - Stamp duty - Conveyance or transfer on sale - Associated companies - Beneficial ownership of not less than 90 per cent. of issued share capital - Whether 90 per cent. of nominal or actual value -
The taxpayers' authorised share capital in 1967 was divided into 112,387 cumulative redeemable preferred shares of $100 (Canadian) each, of which 62,387 were issued, and 280,000 common shares of $10 (Canadian) each, of which all were issued. All the common shares were beneficially owned by Safeway Stores Inc. (American Safeway), but none of the preferred shares. In December 1967 American Safeway transferred to the taxpayers 2,770,000 “A” ordinary shares in Safeway Food Stores Ltd. (English Safeway) for $5,539,187 (U.S.) (equivalent to £2,307,994 at the then rate of exchange of $2.40 (U.S.) to £1). The transfer was assessed to ad valorem “conveyance or transfer on sale” stamp duty of £23,080. The taxpayers appealed to the commissioners on the ground that they were entitled to relief from liability under section 42 of the Finance Act 1930F1 because the transfer was from one company to an associated company, since American Safeway was beneficial owner of “not less than 90 per cent. of the issued share capital” of the taxpayers, if that percentage were considered in relation to the actual value of the shares and not the nominal value. The commissioners decided against the taxpayers.
On appeal by the taxpayers:—
Held, dismissing the appeal, that the words of the statute “90 per cent. of the issued share capital,” referred to the nominal value and were inept to convey the idea of actual value, the concept of share capital in the
The following cases are referred to in the judgment:
Curzon Offices Ltd. v. Inland Revenue Commissioners [
Escoigne Properties Ltd. v. Inland Revenue Commissioners [
Lever Brothers Ltd. v. Inland Revenue Commissioners [
The following additional case was cited in argument:
Times Newspapers Ltd. v. Inland Revenue Commissioners [
CASE stated by the Commissioners of Inland Revenue.
The relevant paragraphs of the case stated were as follows:
1. The opinion of the court was desired as to the stamp duty chargeable on a transfer dated December 28, 1967 (hereinafter called “the transfer”), being a transfer to the taxpayers of 2,770,000 “A” ordinary shares in Safeway Food Stores Ltd. (hereinafter called “English Safeway”) which had been presented by the taxpayers to the commissioners under section. 12 of the
2. Safeway Stores Inc. (hereinafter called “American Safeway”) was a body corporate which was incorporated with limited liability in 1926 under the laws of the State of Maryland.
3. The taxpayer company was a body corporate which was incorporated in Canada with limited liability on January 14, 1929, by letters patent under the Companies Act of Canada under the name of Safeway Stores Ltd. The taxpayers' name was changed to their present name on June 23, 1947. At all relevant times their authorised share capital was $14,038,700 (Canadian) divided into 112,387 cumulative redeemable preferred shares of $100 (Canadian) each (hereinafter called “the preferred shares”), of which 62,387 were issued, and 280,000 common shares of $10 (Canadian) each (hereinafter called “the common shares”), all of which were issued and fully paid. All of the common shares were in the beneficial ownership of American Safeway and carried the right to one vote per share at all general meetings of the taxpayers. None of the preferred shares was in the beneficial ownership of American Safeway. The preferred shares carried no right to vote at any meeting of the shareholders of the taxpayers unless and until the taxpayers from time to time should fail to pay in the aggregate six quarterly dividends on the preferred shares of any series on the dates on which the same should have been paid according to the terms thereof. At all relevant times no such failure had occurred. The preferred shares were quoted on the Montreal and Toronto stock exchanges. They were redeemable at any time by the taxpayers on 30 days' notice at a price varying in accordance with the date of redemption from $104 to $100½ (Canadian) and the taxpayers had the right to purchase preferred shares in the open market for cancellation, but at all relevant times the 62,387 preferred shares had not been redeemed nor purchased for cancellation.
4. The consolidated balance sheet of the taxpayers as at December 30, 1967, showed what was therein described as “shareholders' equity” to be $95,907,431 (Canadian). The “shareholders' equity” comprised the par value of the preferred shares ($6,238,700 (Canadian)), the par value of the common shares ($2,800,000 (Canadian)) and retained earnings ($86,868,731 (Canadian)). At all relevant times the actual value of the preferred shares (as ascertained from the stock market quotations) was below par value and the actual value of the common shares (as ascertained from the balance sheet) exceeded 90 per cent. of the aggregate actual values of the 62,387 preferred shares and of the common shares.
5. English Safeway was a private company incorporated in England with limited liability on June 3, 1954, under the
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