Pierce & Ors v Wood & Ors

Pierce & Ors v Wood & Ors

Section 249(6)(b) of the Taxes Act, as interpreted by Howell v Trippier, requires scrip dividend shares and their sale proceeds to be treated as income for trust law purposes as well as for income tax purposes. Trustees did not exercise any power of accumulation to convert income into capital, and any attempt to do so via deeds was nugatory or voidable under the Hastings-Bass principle.

Parties
Claimant: Heather Pierce; Claimant: Gareth Alun Pierce; Claimant: Rachel Ceri Duncan; Claimant: John Joseph Oliver; Claimant: Deirdre Frances Oliver; Claimant: Alexander Craig Morris; Claimant: Stephen Robert Morris; Defendant: Irene Amy Wood; Defendant: Thomas Edward Oliver; Defendant: James Michel Oliver; Defendant: Trevor Roderick Morris
Jurisdiction
England and Wales
Judgment Date
19 November 2009
Procedural Posture
Part 8 Claim / Trial
Outcome
Claim granted
Legal Topics
Classification of Scrip Dividends, Trust Income Vs Capital, Powers of Accumulation, Hastings Bass Principle, Inheritance Tax Charges
Trusts Tax Classification of Scrip Dividends Trust Income Vs Capital Powers of Accumulation Hastings Bass Principle Inheritance Tax Charges

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Parties

Heather Pierce

Claimant

Gareth Alun Pierce

Claimant

Rachel Ceri Duncan

Claimant

John Joseph Oliver

Claimant

Deirdre Frances Oliver

Claimant

Alexander Craig Morris

Claimant

Stephen Robert Morris

Claimant

Irene Amy Wood

Defendant

Thomas Edward Oliver

Defendant

James Michel Oliver

Defendant

Trevor Roderick Morris

Defendant

Procedural Posture

Part 8 Claim / Trial

Legal Issues

  1. 1 Whether scrip dividend shares and their sale proceeds are income or capital for trust law purposes
  2. 2 Whether trustees exercised their power of accumulation to convert income into capital
  3. 3 Effectiveness of deeds executed by trustees to treat scrip dividends as capital

Ratio Decidendi

Section 249(6)(b) of the Taxes Act, as interpreted by Howell v Trippier, requires scrip dividend shares and their sale proceeds to be treated as income for trust law purposes as well as for income tax purposes. Trustees did not exercise any power of accumulation to convert income into capital, and any attempt to do so via deeds was nugatory or voidable under the Hastings-Bass principle.

Court Disposition

Claim granted

Orders

  • Scrip dividend shares and their sale proceeds are to be treated as income for trust law purposes as well as for income tax purposes.
  • Trustees of the settlements have not exercised any power of accumulation in relation to such trust income.