HM Revenue & Customs (HMRC) has lost a claim against a couple for £20,000 in back taxes.
The Revenue claimed tax was due on dividends paid as part of a settlement under the Income and Corporation Taxes Act 1988.
However, in a decision published this month, the First-Tier tribunal found in favour of the couple.
Tribunal judge Barbara Mosedale concluded an arrangement under which David Patmore paid his wife dividends on non-voting B shares in their company did not fulfil the criteria for an s660a settlement.
In the late 1990s, Mr and Mrs Patmore paid £320,000 to buy the small manufacturing company for which Mr Patmore worked.
The husband and wife jointly funded a share purchase with 97% of shares bought transferred to the husband and a new class of shares allotted to his wife.
An initial instalment of £100,000 for the shares was funded by a second mortgage the couple took out on their house.
Mrs Pamore received approximately 40% of the dividends.
Following the advice of their accountant, RJ McMorran, the company's shares were reorganised into two classes of shares, with Mrs Patmore owning 2% of the A shares and 10% of the non-voting B shares, on which dividends were paid between 1999-2003.
The dividends were immediately credited to Mr Patmore's loan account to set against the outstanding purchase payments for the company.
HMRC argued that under this arrangement, the B share dividends should be taxed on Mr Patmore as a 'settlor'.
However, when looking at "the broad and realistic view" of the case, the judge ruled this was not the case.
First mentioned in Cridland Report
Second acquisition of 2019
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.
Four key areas to focus on
And 94% for critical illness