Revenue

Tax avoidance - corporation tax - payment of dividend not in itself 'a transaction in securities' activating avoidance provisionsInland Revenue Commissioners v Laird Group Plc: ChD (Lightman J): 28 February 2001In June 1990 the taxpayer purchased the share capital of S Ltd.

In December 1990 the taxpayer declared a dividend on its own shares of 3.5 million.

Thereafter S Ltd paid the taxpayer a dividend of 3 million and because that payment was outside a group election S Ltd accounted to the revenue for advanced corporation tax (ACT) on it.

The taxpayer received the dividend as franked investment income and thus the ACT paid on it was set off against the ACT on the taxpayer's dividend.

As a result the taxpayer paid less ACT on its dividend than it would have done but for the S Ltd dividend.

The taxpayer received a notice and consequential assessment to counteract a tax advantage under avoidance provisions in sections 703 and 704 of the Income and Corporation Taxes Act 1988.

A tribunal, hearing an appeal from special commissioners, upheld the taxpayer's challenge to their validity.

The Crown appealed.Michael Furness QC (instructed by Solicitor of Inland Revenue) for the Crown.

Andrew Thornhill QC (instructed by Ashurst Morris Crisp) for the taxpayer.Held, dismissing the appeal, that, in the light of House of Lords authority, on a true construction of section 703(3) of the Income and Corporation Taxes Act 1988 the payment of a dividend involving no dealing with securities and no alteration of rights attaching thereto did not constitute 'a transaction in securities' and the avoidance provisions in section 703 therefore did not apply to the transaction in question.