Clipperton and another v HMRC

In Clipperton and another v HMRC [2022] UKUT 351 (TCC) (20 December 2022) the Upper Tribunal (UT) found that the First-tier Tribunal (FTT) had been correct to conclude that payments made under a ‘dividend replacement scheme’ were applying a purposive construction distributions and that the settlements legislation did not apply. HMRC’s cross appeal against the FTT’s finding that the appellants were not settlors was however allowed.  

The case involved a scheme designed to enable a company (Topco) to put sums into the hands of its two shareholders without attracting the income tax on dividends. Topco incorporated a subsidiary (Subco) which issued A shares and a B share. Topco settled the B share into a trust in which Topco retained an interest and an amount would be paid to charity but the primary beneficiaries were the two shareholders....