Vandervell v Inland Revenue Commissioners
| Vandervell v IRC | |
|---|---|
 |
|
| Court | House of Lords |
| Decided | 24 November 1966 |
| Citation(s) | [1967] 2 AC 291 |
| Case history | |
| Prior action(s) | [1966] Ch 261 |
| Court membership | |
| Judge(s) sitting | Lord Reid, Lord Pearce, Lord Upjohn, Lord Donovan and Lord Wilberforce |
| Keywords | |
| Resulting trust | |
Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 is a leading English trusts law 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, 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's Trusts (No 2),[2] which concerned whether Vandervell could be taxed because he could have an equitable interest through a resulting trust if he had exercised an option right.
Tony Vandervell was a wealthy racing car manufacturer with a company called Vandervell Products Ltd. He wanted to donate to the Royal College of Surgeons, to establish a chair of pharmacology. He also wanted to avoid paying tax on the donation. At the time, stamp duty 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 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 made a claim for tax on the transfer.
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