(1)Trustees of the Bessie Taube Discretionary Settlement Trust (2)Trustees of the Raymond Taube Discretionary Settlement Trust (3)Raymond Taube v Commissioners for Her Majesty's Revenue and Customs
Decision date: 7 October 2010
Neutral citation: [2010] UKFTT 473 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerned whether special cash dividends paid to two discretionary trusts after a company share reorganisation were trust income or capital, and whether HMRC validly made a s.29 TMA discovery assessment on the life tenant, Mr Taube. The Tribunal held the payments were bona fide distributions of income (not capital reconstructs) and so taxable as income; it also upheld HMRC’s s.29 discovery assessment on Mr Taube while rejecting application of s.29(4) on the basis that the trustees’ advisers were not persons “acting on [his] behalf.”
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
A cash distribution by a company made out of distributable profits is prima facie trust income and will be treated as such unless the substance of the transaction shows it was not a distribution (e.g. a true capital reconstruction). For s.29 discovery assessments, HMRC must (i) newly conclude there is a probable insufficiency of tax and (ii) show that, by the time its entitlement to enquire ended, an officer could not reasonably have been expected, from information made available by the taxpayer or someone acting for him, to be aware of that insufficiency.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal noted (obiter) that a trustee’s or beneficiary’s mistaken reliance on legal advice does not alter the legal character of a genuine cash dividend as income, and that the phrase “person acting on [the taxpayer’s] behalf” in s.29(4) denotes a representative who acts for and represents the taxpayer to HMRC (for example by preparing or submitting returns or corresponding with HMRC), not a mere external adviser who only gives advice to trustees.