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Scrip issue

07 May 2015
Categories: Tax cases , Capital Gains , Income Tax , Inheritance Tax

M Seddon & others (TC4344)

The taxpayers were trustees of the Mrs M Seddon Second Discretionary Settlement established in March 1999.

They received a scrip dividend in January 2000 and made a distribution worth £1.26m to the beneficiaries a few days before the tenth anniversary of the settlement.

An issue arose concerning the rate of the exit charge for inheritance tax purposes (IHTA 1984 s 68).

The taxpayers said the scrip dividend was income in the hands of the trustees and had not been accumulated as capital meaning the exit charge was 0% and no IHT was payable on the distribution.

HMRC held that the scrip dividend was capital and should be taken into account when calculating the exit charge which the department said was due at 4.817%.

The taxpayers appealed.

The First-tier Tribunal noted there were “conflicting decisions of the High Court and Upper Tribunal” on scrip dividends ...

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