Articles
Some more examples of Ann Humphrey's writings on tax matters:
SDLT and bare trusts (September 2011)
As I explained in my earlier piece for LawSkills, the SDLT legislation distinguishes between bare trusts and settlements ...Read more >
SDLT and trustees: a reminder (August 2011)
SDLT can be overlooked in trust situations. For example, an SDLT charge may arise where an appointment of land is made from an estate ...Read more >
SDLT: trees and PIPs (June 2011)
We are aware that FA 2003, Sch 15 para 14 now limits a charge to stamp duty land tax on transfers of partnership interests ...Read more >
SDLT: which value? (May 2011)
A client is considering leasing a property, which he owns personally, to a company that is connected ...Read more >
Please re-lease me (March 2010)
We are increasingly coming across renewal of leases and, in accordance with normal practice, we have claimed the professional fees as allowable ...Read more >
SDLT: partnership dissolution (December 2009)
I am dealing with the dissolution of a family farming partnership of three brothers where one (the continuing farmer) will receive the farmland...Read more >
Purchase of own shares: payment in cash or kind? (December 2009)
A client company of ours is looking to purchase its own shares by transferring a property to a retiring shareholder instead of paying cash...Read more >
SDLT: assignment at a loss (May 2009)
Our client, A, agreed to purchase a flat off-plan for £450,000 and entered into an agreement for lease. Unfortunately, having been made redundant...Read more >
SDLT Update for Property Lawyers
This presentation covered the changes to the SDLT regime introduced by the 2009 Budget and also highlighted some points which had cropped up in practice over the previous twelve months.
VAT and Property Transactions
This hour-long workshop was devised for the property group of a medium-sized law firm and began by considering the VAT conundrum facing many a property lawyer – the taxable/exempt distinction and why it matters. Members of the firm were invited to send in their VAT queries in advance and these formed the basis of a question and answer session.
Purchase of own shares: payment in cash or kind? (December 2009)
A client company of ours is looking to purchase its own shares by transferring a property to a retiring shareholder instead of paying cash. At first sight, this would not appear to be legally possible as HMRC guidance in the Company Taxation Manual at CTM17505 states that a payment must be made in cash. However, this appears to contradict the decision in BDG Roof-Bond Ltd v Douglas [2000] 1 BCLC 401, where the court held that a transfer of assets is possible, being akin to a dividend in specie.
Section 691 Companies Act 2006 merely requires that the shares must be paid for on purchase – there is no specific requirement for this to be in cash.
First, is the view of HMRC correct?
Secondly, if it is valid, will the transaction be exempt from stamp duty land tax on the grounds that no consideration is given? This would be so if we were dealing with a dividend in specie (provided that the transfer is not in satisfaction for a declared dividend) or company liquidation.
Query 17,523 – X Man
Answer:
In my view HMRC are correct. A purchase of own shares by a company must be paid for in cash. Payment cannot be deferred.
This is the position taken in Buckley on the Companies Acts citing the decision of the House of Lords in IRC v Littlewoods Mail Order Stores [1965] AC 135 as authority for the proposition that the words ‘sale’ and ‘purchase’ in ordinary legislative usage require an exchange of property for cash and not for any other form of property.
The remarks of Park J in BDG Roof-Bond Ltd v Douglas that the word ‘payment’ in section 159(3) Companies Act 1985 (in effect, the predecessor to section 691 Companies Act 2006) was not limited to payment in money but also included payment by transfer of assets were obiter.
For the sake of completeness, I would add that, if HMRC were wrong and the transaction could be structured as X Man sets out, for SDLT purposes the transfer of the property would be in consideration of the shares given up by the retiring shareholder. As X Man says, a distribution in specie consisting of the transfer of an interest in land is only free of SDLT where there is no chargeable consideration.
Marilyn Merlot (Ann Humphrey)
First published in Taxation magazine Readers’ Forum www.taxation.co.uk
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