INSOLVENCY

Transactions at undervalue - taxpayer liable for undisclosed profits - transfer of assets to be set asideInland Revenue Commissioners v Hashmi and another: ChD (Hart J): 4 October 2001In 1989 the taxpayer executed a trust deed transferring in consideration of "natural love and affection" to his son, the defendant, his beneficial interest in restaurant premises used in his business.

In 1993 the revenue instituted an investigation concluding that the taxpayer had substantial undisclosed business profits.

The taxpayer died in 1997, his tax liabilities outstanding and his estate insolvent.

The revenue, contending that the 1989 trust effected a transaction at an undervalue made for the purpose of putting assets beyond its reach, applied to the court for a declaration under section 423 of the Insolvency Act 1986 that the deed be set aside.

Kate Selway (instructed by Solicitor of Inland Revenue) for the revenue.

Neil Cadwallader (instructed by Emsleys, Leeds) for the defendant.

Held, granting the application, that section 423 of the 1986 Act related to transactions at undervalue entitling the court to make orders to protect "victims" if satisfied that the purpose of the transaction was to put assets out of reach; that although the taxpayer in 1989 as a caring father had wished to secure his son's future his subsequent conduct had subjected him to substantial financial risk; and that, notwithstanding the possibility of a dual purpose for executing the deed, the facts supported the inference that the statutory purpose was satisfied.