Known in the House of Lords as the “Arctic” case, this case was heard in June. Their Lordships are deliberating at the moment and the judgement is expected in a few weeks. We will advise you as soon as the judgement is delivered.

A copy of the case report from the Court of Appeal can be found in the February 2006 edition of tax.point.

Summary of situation to Court of Appeal

In 1992, Mr Jones and his wife acquired from company formation agents one of the two issued shares in Arctic Systems Ltd (“the Company”) through which to exploit the personal services of Mr Jones as an information technology consultant. Mr Jones was appointed the sole director and Mrs Jones the company secretary. The business of the Company prospered and by 1997 it was paying dividends to Mr and Mrs Jones in addition to the remuneration it paid them for their respective services.

The Revenue argued that the dividend paid to Mrs Jones was income arising under that settlement so that it was deemed, pursuant to s.660A(1) ICTA, to be income of Mr Jones. The argument was based on the ground that the arrangements they had made in 1992 constituted a settlement within the definition contained in s.660G(1) ICTA 1988 comprising the share in the Company registered in her name. The taxpayer contended that the arrangements made between himself and his wife did not constitute a settlement.

The Court of Appeal found in favour of the taxpayer on the basis that it would be an unjustified extension of the scope of the settlement provisions for a commercial venture such as in this case to be brought within the scope of the settlement provisions.

While there is no direct corresponding Irish legislative provision to s.660A ICTA 1988, the decision may be useful in relation to issues arising on settlements as covered in Part 31 TCA 1997.