In Mark Dunsby v HMRC [2020] TC7755, a tax scheme designed to transfer tax-free cash out of an owner-managed company fell foul of both the settlements and transfer of assets abroad rules.

  • Mr Dunsby used his company Majordegree Ltd to enter into a tax scheme that aimed to extract tax-free dividends from the company.
  • The company allotted a new share in a new share class to a Mrs Gowver. She was based abroad and part of the scheme. 
  • The company paid a £200,000 dividend on the new class of share which, under the terms of the trust, belonged to charity in the amount of £1,497, to Mrs Gower as to £3,103, with the balance on trust for Mr Dunsby in his lifetime then his family. Mr Dunsby received £195,400.
  • The tax planning was notified to HMRC under DOTAS.

HMRC raised an assessment and challenged the planning on the basis that:

  • The company had made a taxable distribution to the director.
  • The director had created a Settlement and so was taxable on its dividend income being the settlor of a settlor-interested trust.
  • The director was taxable on the distribution under the Transfer of Assets Abroad legislation.

The FTT found that:

  • The company had not made a direct distribution to Mr Dunsby. 
  • As the settlements legislation is sufficiently broadly drafted to cover most tax planning arrangements, Mr Dunsby was, like Mrs Gower, a settlor of the trust. He had allowed his company to create a new share class and allot her with a share.
  • As the trust was settlor interested, income payable to the trust was taxable on the settlor. That income was a distribution by dividend.
  • The transfer of assets abroad legislation did not apply if the trust's income was Mr Dunsby’s as he is based in the UK.
  • Alternatively, if Mrs Gower was a settlor the arrangement, the transfer of asset abroad provisions would apply to the trust income if it was paid to a person abroad and therefore it was taxable on Mr Dunsby.

The judge also amended the assessment increasing it to the sum of £200,000, that being the sum total extracted from the company.


This is a short summary of this case. This is the lead case in a number of similar appeals. It is listed for appeal. It will be interesting to see if the Upper Tribunal disagrees with the analysis.

Useful guides on these topics

Dividend index
This is an 'At a glance' index to dividends, for companies and their owners, with guidance from how to tax dividends to how to legally vote and pay a dividend.

Dividend tax
How dividends are taxed on individuals.

Shifting your income to avoid tax
What could possibly go wrong? A round-up of the rules that may catch out the unwary.

Disclosure of tax avoidance schemes (DOTAS)
What are rules on Disclosure of tax avoidance schemes (DOTAS)? When should you disclose your use of a tax avoidance scheme? What are the consequences of non-disclosure? How are penalties calculated?

Settlement rules
What are the settlement anti-avoidance rules? How do these rules catch some common family tax planning? What are the rules for spouses and other family members?

Transfer of assets abroad
What are the ToA rules? When do they apply? Is there any defence against the rules?

External link

Mark Dunsby v HMRC [2020] TC7755