In a complex case involving the interaction of the settlements legislation and the distribution rules, the Upper Tribunal has ruled in favour of HMRC in dismissing the taxpayer appeal from the First-tier Tribunal (Clipperton v HMRC [2022] UKUT 351 (TCC)).
According to the Upper Tribunal:
- The FTT had been correct to conclude that a distribution had been made out of assets in respect of shares; and
- the FTT had made the right decision, for the right reasons, in relation to the indirect provision of property.
In answer to a possible concern about a double liability to tax, the Upper Tribunal commented as follows:
“While the application of sections 644 and 645 [of ITTOIA 2005] might in principle lead to the possibility of double taxation, in this case, of course, the only settlors actually liable to tax would presumably be the Appellants, it being part of the tax planning of the scheme that Winn Yorkshire [a firm of accountants of which the appellants were directors and sole shareholders] would not be taxable on the dividend apportioned under the settlement code.”
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