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Comment: HMRC loses again on meaning of “dividend”
When the Government rewrote the tax laws to align the corporate taxation of foreign dividends with that of UK dividends, it opened a can of worms. It has become clear that HMRC holds controversial views on some crucial concepts. One of those was on the meaning of the word “dividend”. In the First Nationwide case, HMRC argued that dividends paid by a Cayman Islands company out of share premium account were not dividends. The Upper Tribunal disagrees and has overturned HMRC’s appeal from the First Tier Tribunal.
It is deeply unsatisfactory that a concept as basic as the meaning of a dividend is in dispute. Perhaps now that HMRC has lost again they will change their approach. They have been ordered to pay First Nationwide's appeal costs. Surely they will not take the case further.
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27 April 2011
Author: Ashley Greenbank
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