Commissioners of Inland Revenue v Botnar
| Jurisdiction | England & Wales |
| Judgment Date | 19 November 1997 |
| Date | 19 November 1997 |
| Court | Chancery Division |
Chancery Division.
Evans-Lombe J.
James Munby QC and Christopher Tidmarsh (instructed by the Solicitor of Inland Revenue) for the Crown.
The taxpayer did not appear and was not represented.
The following cases were referred to in the judgment:
Prenn v Simmonds WLR[1971] 1 WLR 1381
Rabin v Gerson Berger Association Ltd WLR[1986] 1 WLR 526
Income tax - Transfer of assets abroad by individuals ordinarily resident in the UK - Settlement named the taxpayer and his wife as "excluded persons" - Settlement also gave power to trustees to transfer trust property to another settlement which would cease to be regarded as held on the terms of the first settlement - Whether taxpayer had "power to enjoy" property - Income and Corporation Taxes Act 1988 section 739 subsec-or-para (2)Income and Corporation Taxes Act 1970, s. 478(1); Income and Corporation Taxes Act 1988 section 739 subsec-or-para (2)Income and Corporation Taxes Act 1988, s. 739(2).
This was an appeal by the Revenue against part of a decision of the special commissioners that the taxpayer had no power to enjoy income from certain shares within the Income and Corporation Taxes Act 1988 section 739 subsec-or-para (2)Income and Corporation Taxes Act 1970, s. 478(1) in the years 1974-75 to 1987-88 nor within theIncome and Corporation Taxes Act 1988 section 739 subsec-or-para (2)Income and Corporation Taxes Act 1988, s. 739(2) in the years 1988-89 and 1989-90.
By a series of transactions starting in 1974 the taxpayer transferred shares in Datsun (UK) Ltd (later called Nissan (UK) Ltd) to be held by a settlement established in Liechtenstein. In the absence of evidence as to Liechtenstein law, English law was applied in construction of the settlement.
The settlement, which described the taxpayer and his wife as "excluded persons", provided by cl. 23 that no excluded person should be capable of taking any benefit under the settlement. But by cl. 3(c) of the settlement, the trustees had power to transfer the whole or part of the capital to trustees of another settlement and the property transferred should cease to be held on the terms of the original settlement.
The special commissioners concluded that the taxpayer and his wife were individuals to whom Income and Corporation Taxes Act 1988 section 739 section 739s. 478 and s. 739 applied, against which finding there was no appeal. However, they also concluded that the taxpayer and his wife had no "power to enjoy" the income from the settled shares.
Held, allowing the Revenue's appeal:
The interlocking provisions of cl. 3(c) and 23, seen in the context of the settlement, were intended to make it possible to apply the trust fund by resettling whole or part of it on trusts which might include an excluded person as a beneficiary so as to benefit the taxpayer or his wife in the future. Accordingly the taxpayer and his wife were potential beneficiaries of the power contained in cl. 3(c) of the settlement with power to enjoy the income from the settled shares.
Evans-Lombe J: These are appeals by way of two cases stated dated 12 November 1986 and 17 October 1997 in respect of the tax affairs of Octav Botnar. The appeals concern assessments to income tax pursuant to Income and Corporation Taxes Act 1988 section 739 subsec-or-para (1)s. 478(1) of the Income and Corporation Taxes Act 1970 for the years 1974-75 to 1989-90 inclusive and pursuant toIncome and Corporation Taxes Act 1988 section 739s. 739 of the Income and Corporation Taxes Act 1988 (the statutory successor to Income and Corporation Taxes Act 1988 section 739s. 478 of 1970 Act) for the years 1988-89 and 1989-90. The appeals are from some of the conclusions reached by the special commissioners contrary to the submissions of the Revenue in their decision dated 28 May 1996.
Before the special commissioners both the Revenue and the taxpayer Mr Botnar appeared by leading and junior counsel. Before me, only counsel for the Revenue appeared to argue the appeals. The taxpayer was on notice of the date for hearing the Revenue's appeals. Shortly before the hearing commenced I was shown communications to the court by solicitors appearing to be instructed on behalf of the taxpayer to the effect that his ill health prevented him from either appearing in person on the appeals or instructing others to appear on his behalf. The clear implication of the communications was that the court should adjourn the hearing so that Mr Botnar should be given an opportunity to recover sufficiently from his ill health either himself to argue or to instruct others to argue on his behalf contrary to the Revenue's submissions on the appeals although no request for an adjournment was made in express terms. In the result I elected to proceed with the appeals.
The factual background of the decision appealed from is set out by the special commissioners in para. 1 to 151 of their decision and which I will not repeat here. It is the central contention of the Revenue that Mr Botnar...
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