In HMRC v Peter Gould [2024] UKUT 00285, the Upper Tribunal (UT) found that an interim dividend paid to two shareholders on different dates was taxable in different tax years.
- On 31 March 2016, the board of directors of Regis Group (Holdings) Limited resolved to pay an Interim dividend of £40m to its two shareholders. £20m was paid to:
- Nicholas Gould (NG) on 5 April 2016.
- Peter Gould (PG) on 16 December 2016.
- PG claimed that his dividend was Taxable when paid to him, in the 2016-17 tax year.
- He was Non-UK resident in that year and it would not, therefore, be Subject to UK tax.
- While not relevant to the case, NG declared his dividend in the 2015-16 tax year when paid, avoiding the increased dividend tax rate in 2016-17.
- HMRC opened enquiries into PG’s 2015-16 and 2016-17 tax returns and issued Closure notices on the basis that the dividend should have been taxed in the UK in 2015-16.
- PG Appealed to the First Tier Tribunal (FTT).
The FTT allowed the appeal, finding that:
- While shareholders of the same class must be treated equally, the company documents and how the dividend was declared did not mean the dividends were ‘due and payable’ on the same date.
- PG would not have been successful in petitioning the court to enforce the payment of the dividend from the date of payment to NG and no debt was created by the declaration of the dividend, as:
- The court would have considered PG’s agreement to deferral of the payment, under professional advice, as removing any claim to the court for unfair prejudice.
- Any remedy would have been at the court’s discretion. The FTT was unable to have confidence in the court ordering payment of the dividend, and less still that it was due and payable on 5 April 2016.
HMRC appealed to the Upper Tribunal (UT), which found that:
- The FTT had erred in law: PG did have an enforceable debt once the company paid the interim dividend to NG.
- This was not a material error of law as the FTT was entitled to find (and did find) that:
- The principle in re Duomatic Limited applied. The shareholders had informally agreed that the articles would be amended so that the directors were permitted to pay dividends at different times without creating a debt.
- Had there otherwise been an enforceable debt, PG had waived his right to enforce payment of the dividend under a contractually binding agreement.
- By delaying payment into the new tax year PG accepted he was at risk of it not being paid. There was a waiver by PG of his right to enforce payment of the dividend at the same time as NG.
The appeal was dismissed.
Useful guides on this topic
Dividend tax
This practical tax guide explains how dividends are taxed. It includes HMRC's own examples, more detailed examples, including an Owner Managed Business (OMB) section together with tax planning tips.
Dividends: Formalities for companies
This is a briefing note for discussion with directors about the formalities of declaring and paying dividends.
Dividends: Board minute template
Pro-forma board minute template for declaring an interim dividend.
Dividends: Tax voucher
Pro-forma tax voucher for interim dividends.
Non-resident Tax Toolkit
This toolkit covers the key UK tax issues for non-UK resident individuals holding UK assets and property and working in the UK.
SRT: Statutory Residence Test
What is the Statutory Residence Test (SRT)? Why is it important and how does it determine a person's residency?
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