Inland Revenue Comrs v Laird Group plc

The statutory definition of a transaction in securities is deliberately wide. It is not confined by the legislative mischief, by the examples in the definition, or by an implied limitation concerning the alteration of rights. A unilateral act may qualify. The declaration of a final dividend or payment of an interim dividend is therefore capable of being a transaction in securities because it relates to the shares and changes the parties’ rights in the money paid. The separate requirements of a prescribed circumstance and a consequential tax advantage, together with statutory escape routes, do not justify narrowing the definition.

The Revenue appealed from Lightman J’s dismissal of its appeal against the tribunal’s decision. The tribunal had allowed Laird Group plc’s appeal against a notice and assessment under Part XVII Chapter I of the Income and Corporation Taxes Act 1988; the Special Commissioners had dismissed Laird’s earlier appeal.

Laird had acquired Stanton Rubber and Plastics Ltd. Stanton later paid Laird an interim dividend, generating an advance corporation tax credit which was set against relevant liabilities. It was common ground that a prescribed circumstance and a tax advantage existed. The central issue was whether the interim dividend was a transaction in securities within section 709(2).

1. Appeal allowed. The Vice-Chancellor, with Mummery LJ and Longmore LJ agreeing, held that the interim dividend was a transaction in securities within section 709(2) of the Income and Corporation Taxes Act 1988.
2. The definition is expressed in wide terms and must be given its full effect. Commissioners of Inland Revenue v Parker [1966] AC 141 established that it is not to be cut down by the supposed mischief of the legislation or by the particular examples following the general words. A unilateral act may be a transaction in securities. The requirements of a prescribed circumstance and a consequential tax advantage are additional requirements, while section 703(1) provides statutory escape routes.
3. Commissioners of Inland Revenue v Joiner [1975] 1 WLR 1701 did not establish a generic limitation excluding acts which give effect to pre-existing rights. Its reasoning concerning liquidation was tied to the statutory contrast in section 703(2).
4. The court preferred the reasoning of Lord Reid and Lord Simon of Glaisdale in Greenberg v Commissioners of Inland Revenue [1972] AC 109. A dividend declaration or payment relates to the shares, and payment changes the company’s and member’s rights in the money paid.
5. The Attorney-General’s parliamentary statement was inadmissible under Pepper v Hart [1993] AC 593, since the definition was not ambiguous, obscure or productive of absurdity. Even if admitted, it could not narrow the definition consistently with Parker. The appeal was allowed with costs.

• Court of Appeal: The Revenue’s appeal allowed and the order dismissing its appeal was reversed, with costs.
• Chancery Division, Lightman J: The Revenue’s appeal from the tribunal was dismissed; the decision is reported at [2001] STC 689.
• Tribunal: Laird’s appeal was allowed and the notice and assessment discharged.
• Special Commissioners: Laird’s appeal was dismissed and the notice and assessment confirmed.