In Bupa Insurance v HMRC (FTC/27/2013 – 16 June 2014) the UT held that distributions subject to an earn-out remained in the beneficial entitlement of their holder.
Under a share purchase agreement Bupa (the purchaser) was obliged to pay to Tawa (the vendor) an amount equal to any distribution as ‘earn-out consideration’. The issue was therefore whether Bupa was beneficially entitled to the distributions for consortium relief purposes (ICTA 1988 s 403C).
The UT observed that the beneficial entitlement referred to in s 403C could be held both directly and indirectly via another body corporate. This showed that ‘beneficial entitlement’ was a wider concept than ‘equitable ownership’. The ‘more than a mere legal shell’ test applied to ascertain whether there was a ‘beneficial’ right of ownership.
The UT observed that Bupa did not hold the distributions as constructive trustee and had more than a ‘mere legal shell’. It...
