08 May 2025

Beard v HMRC [2025] EWCA Civ 385

The Court of Appeal has released its decision dismissing the taxpayer’s appeal against the decision of the UT.

The taxpayer was a shareholder of Glencore plc, a Jersey-incorporated company. The taxpayer received distributions (including an in specie distribution) from Glencore’s share premium account. The dispute between the taxpayer and HMRC was whether the distributions were (i) “dividends” and (ii) not “of a capital nature”, such as to fall within s.402 ITTOIA 2005.

By the time the matter reached the Court of Appeal, the main dispute was whether the dividends were of a capital nature. On this issue the Court of Appeal held that the key test to apply to determine whether a distribution was income or capital in nature was the foreign company law mechanism used. On the facts of the case, the distributions were all distributed via Part 17 of the Company (Jersey) Law 1991 which was generally the mechanism used to distribute trading profits. Whilst on the facts it was share premium that was distributed under Part 17 this did not alter the result. In other words, one did not consider what was being distributed but how it was being distributed. HMRC accepted that if the share premium had been distributed under Part 12 as a reduction of capital (which was also possible given the flexibility of Jersey law) then the taxpayer would have had a capital receipt instead.

The other issue that the Court decided was whether an in specie distribution was a dividend (the dividend point having been conceded in respect of the cash distributions). Here the Court’s reasoning was shorter. It concluded that there was nothing to distinguish the position from the cash distributions and in particular the same mechanism was used.

David Yates KC and Calypso Blaj appeared for HMRC.

To view a copy of the decision please click here.