Distributions had the nature of income

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.

He received distributions from the company’s capital account. He claimed the distributions had been paid out of share premium account and were of a capital nature so not chargeable to income tax in the UK (ITTOIA 2005 s 402(4)). HMRC disagreed saying they were liable to income tax.

The First-tier Tribunal agreed with HMRC so the taxpayer appealed to the Upper Tribunal.

The Upper Tribunal agreed with the First-tier Tribunal that in determining the correct 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...