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Gift of shares constitute settlement

21 January 2009
Categories: Tax cases , Income Tax
Bird (SpC 720)

A married couple were joint shareholders and directors of the family company.

The husband’s father died in 1994 bequeathing his estate in equal shares to the couple’s three children.

In April 1994 the company made a share issue so that each child had a 20% interest in the company and reducing each parent’s stake to 20%.

In their self-assessment returns the husband and wife did not enter the children’s dividends as their own income.

HMRC subsequently amended the couple’s self assessments to include the children’s income on the basis that it was income arising under a settlement (TA 1988 s 660G) and was assessable on the parents under s 660B(1).

The parents appealed on the ground that the children’s shareholdings had been part of a purely commercial transaction.

The Special Commissioner ruled that the issue of shares to minor children in such circumstances amounted to a...

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