Jurisdiction(s):
United Kingdom

Court of Appeal (England and Wales) rules Jersey share premium distributions (cash and in specie) are taxable dividends, not capital; mechanism trumps origin; foreign law labels irrelevant (Beard v HMRC)

Published on: 07 May 2025

Published by a LexisNexis Tax expert

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Beard v HMRC [2025] EWCA Civ 385

Section 402(1) of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) levies income tax on dividends paid by companies that are not UK resident. Under s 402(4), dividends do not encompass ‘dividends of a capital nature’. Aside from that carve-out, the statute does not define ‘dividend’. The Explanatory Notes to the Bill that became ITTOIA 2005 indicate that identifying a dividend ‘will usually be a matter of referring to the relevant company law’. Case law has clarified the concept of a ‘dividend’ in other settings (for example, Memec v IRC [1996] STC 1336) and the capital versus income character of payments (for example, IRC v Reid’s Trustees [1949] AC 361, In re Duff’s Settlement [1951] Ch 923, Rae v Lazard [1963] 1 WLR 555, Courtaulds v Fleming [1969] 1 WLR 1683, Sinclair v Lee [1993] Ch 497 and First Nationwide v RCC [2012] EWCA Civ 278). The Court of Appeal had to decide whether distributions from a company incorporated in Jersey and resident in Switzerland fell within the s 402(1) charge...

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