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Participant in tax avoidance scheme was the settlor of a settlement

By Mark McLaughlin, September 2020

The appellant, who participated in a tax avoidance scheme, was a ‘settlor’ of a ‘settlement’ under the settlements anti-avoidance provisions, and accordingly the income arising under the settlement (being dividend income) fell to be treated as the appellant’s for income tax purposes.    

The appellant was party to tax avoidance arrangements designed to allow shareholders in private companies to extract profits from those companies without paying income tax thereon. 

There were three main elements to the scheme: (1) The creation of a new class of ‘S’ shares and the issue of a share(s) in that new class to a non-resident individual; (2) The transfer by the non-resident individual of that share(s) to a Jersey trust in which the non-resident individual retained an interest, but from which the original shareholder could benefit; (3) The declaration of a dividend on the new class of shares in circumstances,

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