Carreras Group Ltd v Stamp Commissioner

JurisdictionUK Non-devolved
JudgeLord Hoffmann
Judgment Date01 April 2004
Neutral Citation[2004] UKPC 16
CourtPrivy Council
Docket NumberAppeal No. 24 of 2003
Date01 April 2004

[2004] UKPC 16

Privy Council

Present at the hearing:-

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Rodger of Earlsferry

Lord Carswell

Lord Brown of Eaton-under-Heywood

Appeal No. 24 of 2003
Carreras Group Limited
Appellant
and
The Stamp Commissioner
Respondent

[Delivered by Lord Hoffmann]

1

On 27 April 1999 Carreras Group Ltd ("Carreras") entered into a written agreement to transfer all the issued ordinary share capital and most of the preference shares in Jamaica Biscuit Company Ltd ("Jamaica Biscuit") to Caribbean Brands Ltd ("Caribbean"). The consideration was expressed to be a debenture to be issued by Caribbean in the sum of US$37.7 million and in terms annexed to the agreement. The terms were that the debenture would not be either secured or transferable. The principal debt would carry no interest and be repayable by banker's cheque on 7 May 1999.

2

In the event, the debenture was not redeemed until 11 May 1999, when Caribbean paid US$19.9 million and J$700,344.814 and Carreras accepted these payments in full settlement.

3

The question in this appeal is whether the transfer of shares is chargeable to transfer tax. Section 3 of the Transfer Tax Act imposes the tax on "the amount or value of such money or money's worth as is … the consideration for each transfer". "Transfer" includes "any legal or equitable transfer by way of sale … exchange … or other disposal". Prima facie, therefore, the transfer of the shares was a disposal which attracted tax on the amount or value of the consideration.

4

Part I of the First Schedule contains "special provisions with reference to shares and to debentures". Two of these are relevant: paragraphs 4 and 6. Paragraph 4 deals with "reorganization of share capital". The relevant words are:

"4.-(1) This paragraph shall apply in relation to any reorganization of a company's share capital; and for the purposes of this paragraph …

  • (a) reference to reorganization of a company's share capital include … (i) any case where persons are … allotted … debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) … their holdings of shares in the company …

  • (b) 'original shares' means shares held before and concerned in the reorganization … of capital, and 'new holding' means, in relation to any original shares, the … debentures of the company which, as a result of the reorganization … represent the original shares …

(2) … a reorganization … of a company's share capital shall not be treated as involving any disposal of the original shares."

5

Paragraph 4 thus deals with (among other things) an exchange of shares for debentures in the same company. Paragraph 6(1) extends this to an exchange of shares in one company for debentures in another:

"… where a company issues … debentures to a person in exchange for shares in … another company, paragraph 4 shall apply with any necessary adaptations as if the two companies were one company and the exchange were a reorganization of its share capital."

6

Carreras says that if one reads the agreement of 27 April 1999, it falls squarely within these exempting provisions. The issue of the debenture by Caribbean in exchange for the original shares held by Carreras in Jamaica Biscuit was required to be treated as if Caribbean and Jamaica Biscuit were the same company and the exchange was a reorganisation of its share capital. By virtue of paragraph 4(2), it was therefore not to be treated as involving any disposal of the Jamaica Biscuit shares.

7

Their Lordships agree that the question is whether the relevant transaction can be characterised as a reorganisation of share capital as defined in the Act, that is to say, as an issue of a debenture in exchange for shares. They also accept that if the relevant transaction is confined to what happened on 27 April by virtue of the agreement executed on that date, there can be no doubt that it fell within that description. On the other hand, if one is allowed to take a wider view and to treat the terms of the debenture and its redemption two weeks later as part of the relevant transaction, it looks very different. From this perspective, the debenture is only a formal step, having no apparent commercial purpose or significance, in a transaction by which the shares in Jamaica Biscuit were exchanged for money.

8

Whether the statute is concerned with a single step or a broader view of the acts of the parties depends upon the construction of the language in its context. Sometimes the conclusion that the statute is concerned with the character of a particular act is inescapable: see MacNiven (HM Inspector of Taxes) v Westmoreland Investments Ltd [2003] 1 AC 311. But ever since Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300 the courts have tended to assume that revenue statutes in...

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