Decisions of the FTT in Dunsby and Clipperton: A victory for HMRC, but on what grounds?

Two cases before the First-tier Tribunal – Dunsby (TC7755) and Clipperton and another (TC7998) – considered tax avoidance schemes which sought to take advantage of the application of anti-avoidance legislation (the settlements code).

Both are designated as lead appeals and involve planning designed to enable shareholders to extract profits from trading companies without paying income tax on receipt. The tribunal ultimately found in favour of HMRC in each case but the judges came to opposing decisions on the main substantive issues despite clear parallels between the two.

Steps to implement the scheme

In Clipperton the two appellants were each a director and 50% shareholder of a UK resident company (Winn Yorkshire) which undertook the following steps:

1. Winn Yorkshire formed a new subsidiary (Winn Scarborough) subscribing for 199 A ordinary shares and one B ordinary share.

2. Winn Yorkshire then settled the B...