Income shifting ― where are we now?

Copyright © 2026 LexisNexis
Produced by a Tolley Personal Tax expert
Personal Tax
Guidance

Income shifting ― where are we now?

Copyright © 2026 LexisNexis
Produced by a Tolley Personal Tax expert
Personal Tax
Guidance
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This guidance note looks at the how the settlements legislation may be applied to income shifting and how this has been viewed by the courts since the 2007 Arctic Systems case.

The settlements legislation is discussed in the Income shifting guidance note and it is suggested that the income shifting note would be a good starting point, before addressing the more specific comments on application of case law and HMRC guidance outlined below.

Overview

Arctic Systems remains the leading authority on the application of the settlements legislation to ordinary shares held between spouses or civil partners, although subsequent decisions, including Donovan and McLaren, Patmore and Clipperton, have considered other aspects of the legislation.

Some recent cases

There have been relatively few cases reaching the courts and each has turned on its own facts. They illustrate the likely challenges to income shifting arrangements and suggest a best approach to planning.

In Donovan and McLaren v HMRC, the issue was dividend waivers. Applying the guidelines in the Income shifting guidance note,

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  • 25 Aug 2026 08:05

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