Taxation

Life assurance companies - pre-1996 sales of shares to issuing companies - entitlement to repayment of tax creditsBibby (Inspector of Taxes) v Prudential Assurance Co Ltd; Oakes (Inspector of Taxes) v The Equitable Life Assurance Society: ChD (Sir Richard Scott V-C): 10 May 2000

In 1995, two life assurance companies - one a proprietary life office and the other a mutual - each sold substantial shareholdings to the public companies which had issued them 'own purchase' shares.The life assurance companies' claims for repayment of tax credits, on the basis that the sums received on the sale were 'qualifying distributions' under s.438 of the Income and Corporation Taxes Act 1988 (pensions business: exemptions from tax), were met by the Inland Revenue.Later, the Revenue changed its view on the repayments, forming the opinion that s.95 of the 1988 Act (taxation of dealer's receipts on purchase by company of own shares) applied to the life assurance companies, and raised assessments to recover the repayments.

Special commissioners allowed appeals by the companies and quashed the assessments.

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

Graham Aaronson QC and Malcolm Gammie (instructed by Denton Wilde Sapte) for the life assurance companies.Held, dismissing the appeal, that it was clear from s.95 that Parliament never intended it to apply to life offices, whether proprietary or mutual; and that the commissioners were correct in holding that, for the provision to apply, the companies had to have been charged to tax under Case I of Schedule D, which they had not.