Friday, 23 November 2012

UK: two cases considering unlawful distributions

The operation of the common law and statutory rules regarding permitted distributions from capital has been considered in two recent cases. In the first, Clearwell International Ltd. v MSL Group Holdings Ltd. [2012] EWCA Civ 1440, the Court of Appeal held that [a] the trial judge's findings of fact were unimpeachable and [b] the correct test had been applied in determining that a transaction was bona fide, in the interests of the company and not a disguised return of capital. In the second case, Iliffe News and Media Ltd. v HMRC [2012] UKFTT 696 (TC), in which argument was largely concerned with tax avoidance, the Tribunal found that licence fee payments were in excess of market value but this did not by itself mean that they were unlawful distributions.

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