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Jones v Garnett (HMIT) [2005] EWCA Civ 1553

In the circumstances the dividends paid to a wife on her share in a husband-and-wife company were not income arising under a settlement as defined in the Income and Corporation Taxes Act 1988, s 660G(1) because the payment of modest salaries to the husband and wife and the declaration of dividends were not part of an arrangement constituting a settlement.

27 January 2006

J appealed against the decision that the arrangements between him and his wife (W) in relation to the company (X) through which he provided his services as an information technology consultant, constituted a settlement for the purposes of ICTA 1988, s 660A(1). J and W had each acquired from company formation agents in 1992 one of the two issued shares in X. J was the sole director and W the company secretary. X’s business supplying J’s services prospered and it paid dividends to J and W in addition to the remuneration it paid them for their respective services. The inspector of taxes assessed J to tax in respect of the dividend paid to W in the 1999/2000 tax year on the basis that the arrangements that they had made when X was formed constituted a settlement within s 660G(1) of the 1988 Act comprising the share in X registered in W’s name, and that, therefore, the dividend paid to W was income arising under that settlement so that it was deemed pursuant to s 660A(1) to be the ...

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