Patmore v Revenue & Customs [2010] UKFTT 334 (TC) (14 July 2010)

Patmore v Revenue & Customs [2010] UKFTT 334 (TC) (14 July 2010)

The arrangement between Mr and Mrs Patmore was not gratuitous; Mrs Patmore contributed equally to the purchase and was entitled to a constructive trust over a proportion of the shares. Dividends paid to her up to her entitlement are not caught by s660A as a settlement, but any excess would be. The outright gift exemption does not apply to dividends. Tax assessments must be reduced to reflect Mrs Patmore’s entitlement.

Citation
[2010] UKFTT 334 (TC)
Parties
Appellant: David Thomas Patmore; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
14 July 2010
Procedural Posture
Tax Appeal / First Tier Tribunal Decision
Outcome
Appeal allowed in part; tax assessments to be reduced.
Legal Topics
Anti Avoidance, Settlements Under S660 a ICTA, Dividend Income Attribution, Constructive Trust, Outright Gift Exemption
Tax Law Income Tax Corporation Tax Anti Avoidance Settlements Under S660 a ICTA Dividend Income Attribution Constructive Trust Outright Gift Exemption

Case Brief

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Parties

David Thomas Patmore

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal Decision

Legal Issues

  1. 1 Whether dividends paid to Mrs Patmore are taxable on Mr Patmore under s660A ICTA as income arising under a settlement
  2. 2 Whether the arrangement between Mr and Mrs Patmore constitutes a settlement with an element of bounty
  3. 3 Whether the outright gift exemption under s660A(6) applies

Ratio Decidendi

The arrangement between Mr and Mrs Patmore was not gratuitous; Mrs Patmore contributed equally to the purchase and was entitled to a constructive trust over a proportion of the shares. Dividends paid to her up to her entitlement are not caught by s660A as a settlement, but any excess would be. The outright gift exemption does not apply to dividends. Tax assessments must be reduced to reflect Mrs Patmore’s entitlement.

Court Disposition

Appeal allowed in part; tax assessments to be reduced.

Orders

  • Tax assessments for years 1999/00, 2000/01, 2001/02, and 2002/03 to be reduced to reflect Mrs Patmore’s entitlement to 42.5% of dividends; parties to agree calculations.
  • HMRC to consider equitable liability for overpaid tax in later years.