Payments were not unlawful share distributions

The main issue in the appeal was whether arrangements made between a company and its two shareholders/directors.

It claimed that the transactions - the Blackstar E share scheme - that it had implemented for its director shareholders should be characterised as unlawful distributions to shareholders rather than remuneration to directors. Further they breached the Companies Act 2006 s 580 in relation the issue of shares at a discount and the payment of commissions.

HMRC said the transactions should be characterised in the way the company itself had characterised them at the time – as remuneration to its directors.

The matter proceeded to the High Court which dismissed the taxpayers’ appeal. The tax consequences of the scheme are being tested in the tax tribunal and did not form part of this appeal.

The Court of Appeal upheld the lower court’s decision that the shares were not issued at a discount....