Stafford Robert Buck v Her Majesty's Revenue & Customs, SPC 00716

Spc00716

SETTLEMENT – Dividend waiver – Income arising under a settlement in which settlor retains interest – Arrangement – Company owned by husband and as to one share by wife – Husband waived dividend in relation to all his 9999 shares – Enhanced dividend consequently paid to wife in respect of her one share – Dividend income paid to wife – Whether waiver arrangement constituted a settlement – Yes – Whether element of bounty in arrangement – Yes – Appeal dismissed – Income and Corporation Taxes Act 1988, ss 660A(1) and 660G(1)

STAFFORD ROBERT BUCK Appellant

• and –

Special Commissioner: SIR STEPHEN OLIVER QC

Sitting in public in London on 26 September 2008

No representation for the Appellant

Rupert Baldry, counsel, instructed by the general counsel and solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

1. Mr S R Buck appeals against the amendment to self-assessment in respect of his self-assessment tax return for the year 1998-99 and against a Revenue assessment for 1999/2000.

2. The appeal concerns Mr S R Buck’s waiver of dividends in Leicester, Barfitting Company Ltd (“LBC”) with the effect that substantial dividends were paid to Mrs Buck, his then wife and a minority shareholder. The issue which arises is whether the dividend waivers come within the scope of the income tax “taxation of settlor” provisions.

The relevant facts

3. Since its incorporation in 1976 LBC’s issued share capital has been £10,000 divided into 10.000 shares of £1 each. LBC’s trade has been that of a joinery business.

4. At all material times since January 1994 (when Mr S R Buck’s father died) 9,999 of the issued shares were owned by Mr S R Buck and the remaining one issued share was owned by his former wife, Mrs G I Buck.

5. Mr S R Buck has been the sole director of LBC since 1986.

6. LBC’s profits after tax for the twelve months to 31 March 1999 were £35,707 and the profit carried forward at that date was £46,287. For the twelve months to 31 March 2000 the profit after tax was £5,647 and the profit carried forward was £46,994.

7. On Thursday 18 March 1999 Mr S R Buck, by formal notice in writing to LBC, waived his “dividend entitlement for the year ending 31 March 1999”. Mr Buck, at a director’s “meeting” held on Saturday 20 March 1999 resolved that “a dividend of £35,000 per share be paid on 25 March 1999 for the year ending 31 March 1999”.

8. The following year, on Saturday 18 March 2000, Mr Buck waived his dividend entitlement. According to the company minutes, Mr Buck subsequently resolved at a director’s “meeting” held on Monday 20 March 2000 that a dividend of £35,000 per share be paid on...