Distributions from a Jersey company’s share premium account

The taxpayer held shares in Glencore a publicly listed limited company incorporated in Jersey and domiciled in Switzerland which was also the location of its head office. It was not resident in the UK for tax purposes.

The taxpayer received distributions from the company’s capital account. HMRC said these were liable to income tax. The taxpayer appealed saying the distributions were of a capital nature and therefore not chargeable to income tax in the UK (ITTOIA 2005 s 402(4)).

The First-tier Tribunal noted that UK case law has established that in determining the tax treatment of a payment made by a non-UK company the correct approach was to establish the character of the payment under the corporate law of the jurisdiction in which the paying company was incorporated in this case Jersey and apply UK tax legislation to that payment.

The judge said: ‘The form...