Posted: 25 July 2007
Issue: Online only
Categories: Update, News, Income Shifting, CT, IT & NIC
Keywords: Arctic Systems, Jones v. Garnett

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The House of Lords have found unanimously for Mr Jones in the Arctic Systems case, Jones v Garnett, upholding the Court of Appeal but on different grounds.

The Court of Appeal found that the gift of a share to Mrs Jones was not a settlement. The House of Lords disagreed, and said that the expectation that Mr Jones would take a low salary and that dividends would be paid to both of them had sufficient bounty to be a settlement.

However, the House of Lords unanimously held that s 660A(6) applied to the gift of the share to Mrs Jones, and exempted the dividends from the settlement provisions. Allowing Mrs Jones to acquire the share was a gift by Mr Jones, it was the essence of the arrangement and was therefore an outright gift, and as an ordinary share it was more than 'wholly or substantially a right to income'.

A fuller report of the case will be posted on the website later today, and will be published in the magazine on 2 August. We hope to have an article in the 9 August issue looking at some of the implications of the case.

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