Re McGuckian (No 1)
| Jurisdiction | Northern Ireland |
| Court | Court of Appeal (Northern Ireland) |
| Judgment Date | 01 January 1994 |
| Date | 01 January 1994 |
- Statute - Interpretation - Transfer of assets abroad - Power to enjoy income of person resident or domiciled out of United Kingdom -Income - Taxpayer transferring shares to non-resident settlement of which taxpayer beneficiary - Taxpayer ordinarily resident in United Kingdom - Assignment by non-resident trustee of right to dividend for consideration paid out of dividend - Whether trustee received capital or income - Income and Corporation Taxes Act, 1970, s. 478.
From the date of its incorporation in the Republic of Ireland in 1972 up to 1977, all the issued share capital of B. Ltd. was held by the taxpayer and his wife who were resident and ordinarily resident in the United Kingdom. B. Ltd. had made profits and accumulated reserves, which were available for distribution as dividend. In 1977, the taxpayer and his wife, acting on the advice of a tax consultant, adopted a scheme involving three principal features: (i) the payment of large sums by way of dividend to the shareholders of B. Ltd.; (ii) the setting up of a trust under which the shares in B. Ltd. would be held for the benefit of the taxpayer and his wife by trustees resident out of the jurisdiction; and (iii) the sale by the trustees of their rights to dividends expected to be declared and paid by B. Ltd. to a person resident in the United Kingdom. By those means the assets held by B. Ltd. and the value of its shares would be reduced minimising the taxpayer's exposure to any wealth tax which might be introduced, while liability to income tax on dividends paid out by B. Ltd. would be avoided as the proceeds would be received in the form of capital rather than income payments. Accordingly, the taxpayer and his wife transferred their shares in B. Ltd. to a non-resident settlement, the trustee of which was a Guernsey-resident company. The beneficiaries were the taxpayer and his wife and the income was payable to the taxpayer's wife. In November, 1979, B. Ltd. had income available for distribution amounting to Ir£400.055. On 23 November, 1979, the trustee assigned the right to any dividend payable by B. Ltd. in 1979 to M. Ltd., a United Kingdom-resident company associated with the tax consultant, for Ir£396,054. On 27 November, 1979, B. Ltd. declared a dividend of Ir£400,055 and gave a cheque for that amount to a solicitor for M. Ltd. The solicitor paid the cheque into his client account out of which he then paid 99% of that sum...
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