''Vandervell v Inland Revenue Commissioners''
967
Year 967 ( CMLXVII) was a common year starting on Tuesday of the Julian calendar.
Events
By place
Europe
* Spring – Emperor Otto I (the Great) calls for a council at Rome, to present the new government under Pope John XIII. He ...
2 AC 291 is a leading
English trusts law
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trust law, Trusts were a creation of the English law of English property law, property and English contract law, obligations, a ...
case, concerning
resulting trusts. It demonstrates that the mere intention to not have a resulting trust (for example, to avoid taxes) does not make it so.
This case was the first in a series of decisions involving Tony Vandervell's trusts and his tax liability. It concerned whether an oral instruction to transfer an equitable interest in shares complied with the writing requirement under
Law of Property Act 1925
The Law of Property Act 1925 ( 15 & 16 Geo. 5. c. 20) is an act of the Parliament of the United Kingdom. It forms part of an interrelated programme of legislation introduced by Lord Chancellor Lord Birkenhead between 1922 and 1925. The progr ...
, section 53(1)(c), and so whether receipt of dividends was subject to tax. The second was ''
Re Vandervell Trustees Ltd'', which involved the Special Commissioner of the Inland Revenue's ability to amend tax assessments. The third was
Re Vandervell Trustees Ltd (No 2), which concerned whether Vandervell could be taxed on dividend income (as beneficiary of a resulting trust) if the exercise of an option had validly transferred the beneficial interest in that income to another trust (of which he was not a beneficiary).
Facts
Tony Vandervell
Guy Anthony "Tony" Vandervell (8 September 1898 – 10 March 1967) was a British industrialist, motor racing financier, and founder of the Vanwall Formula One racing team.
Motorsport
Vandervell was the son of Charles Vandervell, founder of CAV ...
was a wealthy racing car manufacturer with a company called Vandervell Products Ltd. He wanted to donate to the
Royal College of Surgeons
The Royal College of Surgeons is an ancient college (a form of corporation) established in England to regulate the activity of surgeons. Derivative organisations survive in many present and former members of the Commonwealth. These organisations ...
, to establish a chair of
pharmacology
Pharmacology is the science of drugs and medications, including a substance's origin, composition, pharmacokinetics, pharmacodynamics, therapeutic use, and toxicology. More specifically, it is the study of the interactions that occur betwee ...
. He also wanted to avoid paying tax on the donation. At the time,
stamp duty
Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). Historically, a ...
applied to outright donations and taxes applied to any income through dividends on company shares. However, since the Royal College of Surgeons was a charity it was not liable to pay tax on any income.
Vandervell orally instructed his trust company (Vandervell Trustees Ltd, which was also set up to administer his money for his children) to transfer 100,000 shares in Vandervell Products Ltd to the Royal College of Surgeons, with an option for the trustees to purchase the shares back for £5000. He then instructed the company to declare a
dividend
A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...
on the shares. So while the shares were in the possession of the Royal College of Surgeons, it paid out £245,000 in dividends up to 1961. Vandervell had hoped this would mean that he would avoid tax (as opposed to simply getting income for himself, on which he would pay tax, and then giving the money to the College). Unfortunately, in 1960, the Inland Revenue assessed Vandervell as being liable to surtax on the dividends on the shares, as if he had not disposed of them.
The Inland Revenue argued that Vandervell retained an equitable interest in the shares. They were still his, as even though the shares were possessed by the College, he had the option to get them back. They also argued his oral instruction to the trust company was not capable of transferring the equitable interest, because it did not comply with the formality requirements specified in
Law of Property Act 1925
The Law of Property Act 1925 ( 15 & 16 Geo. 5. c. 20) is an act of the Parliament of the United Kingdom. It forms part of an interrelated programme of legislation introduced by Lord Chancellor Lord Birkenhead between 1922 and 1925. The progr ...
section 53(1)(c). This section requires signed writing to evidence the existence of a disposition. So he should be liable to pay tax on dividends from those shares.
Judgment
The House of Lords, by three to two, found that Vandervell was indeed liable to pay tax on the £245,000 of dividends given to the
Royal College of Surgeons
The Royal College of Surgeons is an ancient college (a form of corporation) established in England to regulate the activity of surgeons. Derivative organisations survive in many present and former members of the Commonwealth. These organisations ...
. The House of Lords held that the Law of Property Act 1925, section 53(1)(c), was not applicable to situations where a beneficiary directs his trustees, by way of his ''
Saunders v Vautier
, (1841) 4 Beav 115 is a leading English trusts law case. It laid down the rule of Equity (law), equity which provides that, if all of the beneficiary (trust), beneficiaries in the trust law, trust are of Age of majority, adult age and under ...
'' right to do so, to transfer full legal and equitable
[nb Lord Browne-Wilkinson's rejection of such terminology in '' Westdeutsche Landesbank Girozentrale v Islington London Borough Council'' ]996
Year 996 ( CMXCVI) was a leap year starting on Wednesday of the Julian calendar.
Events
By place
Japan
* February - Chotoku Incident: Fujiwara no Korechika and Takaie shoot an arrow at Retired Emperor Kazan.
* 2 March: Emperor ...
AC 669 ownership to someone else. The case is a proposition that an oral declaration to a bare trustee to transfer the trust property to a third party absolutely for his own benefit is a valid disposition. However, Vandervell had not successfully divested himself of ownership (legal and equitable) in the shares, since the Trust Company had an option to purchase the shares back from the RCS. If the settlor does not divest himself adequately as in Vandervell v IRC a resulting trust would operate. The consequence was that Vandervell, as the beneficiary, would remain liable to surtax on the associated dividend income.
Lord Wilberforce said that there was,
See also
*
English trusts law
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trust law, Trusts were a creation of the English law of English property law, property and English contract law, obligations, a ...
*
Resulting trusts in English law
Resulting trusts in English law are trusts created where property is not properly disposed of. It comes from the Latin ''resultare'', meaning to spring back, and was defined by Megarry VC as "essentially a property concept; any property that ...
*''
Re Vandervell's Trusts (No 2)''
974
Year 974 ( CMLXXIV) was a common year starting on Thursday of the Julian calendar.
Events
By place
Europe
* Battle of Danevirke: Emperor Otto II defeats the rebel forces of King Harald I, who has invaded Nordalbingia (modern-day Ho ...
Ch 269
*''
Tinsley v Milligan''
994
Year 994 ( CMXCIV) was a common year starting on Monday of the Julian calendar.
Events
By place
Byzantine Empire
* September 15 – Battle of the Orontes: Fatimid forces, under Turkish general Manjutakin (also the governor ...
1 AC 340
*''
Tribe v Tribe''
996
Year 996 ( CMXCVI) was a leap year starting on Wednesday of the Julian calendar.
Events
By place
Japan
* February - Chotoku Incident: Fujiwara no Korechika and Takaie shoot an arrow at Retired Emperor Kazan.
* 2 March: Emperor ...
Ch 107
*''
Westdeutsche Landesbank Girozentrale v Islington London Borough Council''
996
Year 996 ( CMXCVI) was a leap year starting on Wednesday of the Julian calendar.
Events
By place
Japan
* February - Chotoku Incident: Fujiwara no Korechika and Takaie shoot an arrow at Retired Emperor Kazan.
* 2 March: Emperor ...
AC 669
*''
Air Jamaica Ltd v Charlton''
999 999 or triple nine most often refers to:
* 999 (emergency telephone number), a telephone number for the emergency services in several countries
* 999 (number), an integer
* AD 999, a year
* 999 BC, a year
Media
Books
* 999 (anthology), ''99 ...
1 WLR 1399
*''
Barclays Bank Ltd v Quistclose Investments Ltd''
970
Year 970 ( CMLXX) was a common year starting on Saturday of the Julian calendar, the 970th year of the Common Era (CE) and ''Anno Domini'' designations, the 970th year of the 1st millennium, the 70th year of the 10th century, and the 1st year ...
AC 567
*''
Twinsectra Ltd v Yardley
is a leading case in English trusts law. It provides authoritative rulings in the areas of ''Quistclose'' trusts and dishonest assistance.
Facts
Twinsectra Ltd sued an entrepreneur, Mr Yardley, and two solicitors, Mr Sims and Mr Paul Leach (o ...
''
002 002, 0O2, O02, OO2, or 002 may refer to:
Airports
*0O2, Baker Airport
*O02, Nervino Airport
Astronomy
*1996 OO2, the minor planet 7499 L'Aquila
*1990 OO2, the asteroid 9175 Graun
Fiction
*002, fictional British 00 Agent
*''002 Operazione Luna'' ...
2 AC 164
Notes
{{reflist, 2
References
*RC Nolan, ‘Vandervell v IRC: A Case of Overreaching’
002 002, 0O2, O02, OO2, or 002 may refer to:
Airports
*0O2, Baker Airport
*O02, Nervino Airport
Astronomy
*1996 OO2, the minor planet 7499 L'Aquila
*1990 OO2, the asteroid 9175 Graun
Fiction
*002, fictional British 00 Agent
*''002 Operazione Luna'' ...
CLJ 169, argued that a trustee should not have to take instructions from a beneficiary with a limited interest in shares, because that would be contrary to the principle that a registered owner should vote in the interests of all beneficiaries.
English trusts case law
House of Lords cases
1966 in United Kingdom case law
HM Revenue and Customs
United Kingdom taxation case law