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Same but different
Key points
- The arrangements in Dunsby and Clipperton were designed to enable shareholders to extract profits from trading companies without an income tax charge.
- HMRC argued that the payments were taxable as dividends or distributions on the shareholders because under the settlements code the shareholders were the true settlors of the trust.
- The tribunals came to opposite conclusions on this issue. HMRC’s argument was accepted in Dunsby but rejected in Clipperton.
- However HMRC was successful in Clipperton on Ramsay grounds.
Two cases before the First-tier Tribunal – Dunsby (TC7755) and Clipperton and another (TC7998) – considered tax avoidance schemes which sought to take advantage of the application of anti-avoidance legislation (the settlements code).
Both are designated as lead appeals and involve planning designed to enable shareholders to extract profits from trading companies without paying income tax on receipt. The tribunal ultimately found in favour of HMRC in...
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