Commentary on Sections Overview Overview Section 686: Abnormal dividends used for exemptions or reliefs (circumstance A)
2040.This section is the first in a sequence of sections in which the sets of circumstances in section 704 of ICTA are laid out and expanded in five separate sections. It is based on sections 704 A and 709(3) of ICTA.
2041.The sequence also includes four interpretative sections based on sections 704 D and 709 of ICTA. The approach here takes account of the comments of Slade J in CIR v Garvin (1981), 55 TC 24(1) at page 50:
“The five circumstances set out in [what is now section 704 of ICTA] are set out in minute detail, not for the assistance of the Crown but for the protection of the subject, in the context of a preceding section of a penal nature.”
2042.Subsection (1) requires that three conditions set out in subsections (2) to (4) must be satisfied if section 686 is to apply to a person.
2043.Subsection (3) lays down what the receipt must be in connection with. The approach taken here differs from that in the source legislation. First, the subsection brings together provisions that were previously drafted in separate subsections. Second, in line with judicial comment on these provisions, it does not treat section 709(3)(a) and (b) as non-exhaustive definitions. The approach taken here is consistent with the case law on these provisions: CIR v Parker (1966) 43 TC 396 HL, CIR v Cleary (1967) 44 TC 399 HL, Hague v CIR (1968) 44 TC 619 CA, CIR v Horrocks (1968) 44 TC 645 Ch D and CIR v Wiggins (1978) 53 TC 639 Ch D(2).
2044.Subsection (4) prescribes the tax purposes for which the amount received must be taken into account.
2045.Section 704 A(f) of ICTA is redundant and, accordingly, is repealed without replacement.