Scooter
12th Sep 2006, 04:00
ATO in Virgin matchBy Vanda Carson
September 11, 2006 12:00am
THE Australian Taxation Office will today try to convince the NSW Court of Appeal that four of Richard Branson's Virgin companies have tried to avoid paying tax on $90 million worth of dividends from their investment in Virgin Blue.
The case is an important test of the tax office's ability to challenge complex corporate financial transactions.
The hearing before three appeal judges has been hastily arranged two months after a NSW Supreme Court judge ruled in Branson's favour.
The British- and Swiss-based arms of Virgin Group sued the ATO late last year after the commissioner demanded Virgin Blue withhold tax on dividends before remitting the monies to the overseas shareholders.
The ATO served Virgin Blue with formal demands on December 12 last year, just three days before the company paid out a 25c-a-share dividend to shareholders worth a total of $262 million.
Two Swiss-based Virgin Group companies, Cricket SA and Virgin Holdings SA, were due to share in the dividend payments via their stakes in the discount airline.
A $72.5 million dividend was due to Cricket SA and $20.8 million was due to Virgin Holdings SA.
In a complex series of transactions two days before the dividend was due to be paid, the Swiss companies assigned the "future monies" to Bluebottle UK, a company associated with Virgin Enterprises, which on-lent the money to Barfair Limited.
Barfair lent Virgin Blue funds to establish the airline. As the ultimate beneficiary of the assignments, Barfair was due to be paid $65 million.
The ATO argued at the trial on June 19 that Virgin Blue was liable to retain the dividends and pay them to the commissioner because they belonged to Cricket and Virgin Holdings even if only for a "nanosecond". They argued the round-robin transactions were just a ruse to avoid paying Australian tax.
But in his decision on July 14, NSW Supreme Court judge Ian Gzell dismissed their argument and found the ATO's notice was ineffective because Virgin Blue was not liable to pay the dividends when the notice was served.
He criticised the commissioner's submissions on the application of the corporations law as "curious".
"There was no moment in time when the legal title to the dividends vested in Cricket and Virgin Holdings, free from the equitable interest that had been created in Bluebottle," he said.
The ATO argued the debt from Virgin Blue to its shareholders was due from the date of the board's resolution on November 11, but Justice Gzell said the debt only became due on December 15. The funds are in a bank, pending the outcome of this and other appeals.
September 11, 2006 12:00am
THE Australian Taxation Office will today try to convince the NSW Court of Appeal that four of Richard Branson's Virgin companies have tried to avoid paying tax on $90 million worth of dividends from their investment in Virgin Blue.
The case is an important test of the tax office's ability to challenge complex corporate financial transactions.
The hearing before three appeal judges has been hastily arranged two months after a NSW Supreme Court judge ruled in Branson's favour.
The British- and Swiss-based arms of Virgin Group sued the ATO late last year after the commissioner demanded Virgin Blue withhold tax on dividends before remitting the monies to the overseas shareholders.
The ATO served Virgin Blue with formal demands on December 12 last year, just three days before the company paid out a 25c-a-share dividend to shareholders worth a total of $262 million.
Two Swiss-based Virgin Group companies, Cricket SA and Virgin Holdings SA, were due to share in the dividend payments via their stakes in the discount airline.
A $72.5 million dividend was due to Cricket SA and $20.8 million was due to Virgin Holdings SA.
In a complex series of transactions two days before the dividend was due to be paid, the Swiss companies assigned the "future monies" to Bluebottle UK, a company associated with Virgin Enterprises, which on-lent the money to Barfair Limited.
Barfair lent Virgin Blue funds to establish the airline. As the ultimate beneficiary of the assignments, Barfair was due to be paid $65 million.
The ATO argued at the trial on June 19 that Virgin Blue was liable to retain the dividends and pay them to the commissioner because they belonged to Cricket and Virgin Holdings even if only for a "nanosecond". They argued the round-robin transactions were just a ruse to avoid paying Australian tax.
But in his decision on July 14, NSW Supreme Court judge Ian Gzell dismissed their argument and found the ATO's notice was ineffective because Virgin Blue was not liable to pay the dividends when the notice was served.
He criticised the commissioner's submissions on the application of the corporations law as "curious".
"There was no moment in time when the legal title to the dividends vested in Cricket and Virgin Holdings, free from the equitable interest that had been created in Bluebottle," he said.
The ATO argued the debt from Virgin Blue to its shareholders was due from the date of the board's resolution on November 11, but Justice Gzell said the debt only became due on December 15. The funds are in a bank, pending the outcome of this and other appeals.