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In an appeal concerning three separate issues, the claimant appealed against HMRC amendments to his tax returns for the years 1998/99, 2001/02, 2002/03 and 2003/04.
The first point of appeal concerned income from accounts held jointly between the claimant and his wife. The taxpayer claimed should the income belonged solely to his wife and that he should not be taxed on any of it.
HMRC said that, by virtue of TA 1988, s 282A, half the income of the joint accounts should have been returned as the claimant's. He defended his case by bringing to the tribunal’s attention an agreed change in tax code in 1995, made on the basis that all the income belonged to his wife and not to him.
The tribunal found that no declaration under s 282B had been made to the effect that all the income belonged to the wife. Therefore, in law the taxpayer had drawing rights on the account.
A change in the notice of coding did not prove that an agreement existed with HMRC to the effect that the accounts were to be treated as the wife’s. The tribunal therefore dismissed the first part of the claimant’s appeal.
The second issue concerned the income from a number of building society accounts, and deposits and whether they qualified as a ‘settlement’. Mr Lorber contested that these accounts and deposits belonged beneficially to his two children, and that the funds came from his father (their grandfather).
HMRC argued the claimant was accountable under TA 1988, s 660A and s 660B because he was the settlor, the income arising from the accounts and deposits was payable to his unmarried minor children, and it was not income that arose from property in which he, as settlor, had no interest.
The critical question was, therefore, who the settlor was in relation to the children’s accounts.
The taxpayer said he had power of attorney to effect the transfers of funds from his father. He claimed he was acting as an agent for his father, and could not be regarded as ‘the person by whom the settlement was made’.
The tribunal concluded the grandfather was the settlor. The interest arising from the funds had been consistently returned for tax purposes as the children’s own income.
There was ‘nothing inherently wrong’ with investing the children’s funds in a house that was to be a home for the mother and, presumably, for the children themselves when they were staying with her.
The appeal relating to the income arising to the children’s accounts was allowed, and the tribunal dismissed HMRC’s contentions that sections 660A and 660B applied to the income arising.
The appeal was allowed in part.
