Income tax

Appeal on distributions from overseas company’s share premium dismissed

The Court of Appeal has unanimously dismissed the appeal of the taxpayer in the case of Beard v HMRC, concerning the tax treatment of distributions received by a UK-resident individual from a Jersey limited company derived from its share premium account. The case concerns s402, Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) which brings dividends received from a non-UK resident company into the charge of income tax, subject to an exclusion for ‘dividends of a capital nature’. The taxpayer considered that the amounts received were capital in nature and should be subject to capital gains tax.

The Court of Appeal considered the meanings of ‘dividends’ and ‘dividends of a capital nature’ established under case law. These include several key pre-ITTOIA 2005 authorities, which the Court of Appeal agreed continued to have relevance to s402, as well as the more recent corporation tax decisions and judgment in the case of First Nationwide. In line with this case law, the Court of Appeal focused on the foreign company law and company law mechanisms that governed the relevant payments. In this case, this was Part 17 of the Companies (Jersey) Law 1991, which since 2008 has provided for a mechanism to make share premium amounts more freely distributable. 

The Court of Appeal agreed with the First-tier Tribunal and Upper Tribunal that the cash dividends received by the taxpayer through this mechanism did not constitute ‘dividends of a capital nature’ and were therefore not excluded from UK income tax. The Court of Appeal also agreed that a separate ‘in specie’ distribution of a non-cash asset, paid under the same Jersey company law mechanism, was also a dividend not of a capital nature and thus also correctly subject to income tax.

Alexander Beard v HMRC [2025] EWCA Civ 385

From the Business Tax Briefing dated 9 May 2025, published by Deloitte

Inheritance tax

FTT finds for taxpayer on excluded property

The First-tier Tribunal (FTT) has found that property added to an offshore trust after a taxpayer acquired a UK domicile was still excluded property. 

The taxpayer settled an offshore trust while non-UK domiciled, then later, after becoming UK domiciled, added further property to it. He initially paid a 10-year charge on the additional property on the basis that it was not excluded property, but at tribunal he both argued that this was excluded property and requested a refund of the charge.

The FTT considered the July 2020 changes in the rules around excluded property, but found that this additional property was still excluded. On the repayment point, HMRC argued that the trustees had paid it under a generally received view of the law that was adopted in practice at the time. The FTT found that this was not the case, after receiving evidence from leading tax practitioners, as although it was HMRC’s view at the time, this view was generally found doubtful by practitioners. The FTT found that the 10-year charge payment should therefore be repaid to the trust.

Accuro Trust (Switzerland) SA v HMRC [2025] UKFTT 464 (TC)

From Tax Update May 2025, published by S&W Partners LLP

Appeal on reservation of benefit dismissed

The First-tier Tribunal (FTT) has found that the gift with reservation of benefit rules applied to two trusts settled by the taxpayer more than seven years before his death.

The taxpayer died more than seven years after settling two trusts. One contained a bank account and the other a property, and he was specifically excluded from benefiting from the trust funds.

The FTT agreed with HMRC that these should be included in his estate for inheritance tax purposes. He had reserved benefit by treating the bank account as his own, using it for living expenses, and lived in the property without paying market value rent, as well as running a business from the premises. 

Chugtai v HMRC [2025] UKFTT 458 (TC)

From Tax Update May 2025, published by S&W Partners LLP

Property tax

Appeals allowed on PRR

The First-tier Tribunal (FTT) has found that a property sale was subject to capital gains tax (CGT) and eligible for private residence relief (PRR).

A married couple bought an additional property. This property was demolished, a new house built on the site, and it was then sold. HMRC assessed this purchase, redevelopment and sale as a trade, which would mean that the gain was taxable as income. HMRC also alternatively argued that PRR should be denied if the gain were found to be subject to CGT.

The FTT found for the couple on the basis of factual evidence, on both points. On PRR for CGT, they had lived in the property for the time they claimed, as a home, and nominated it as their main residence. They brought evidence to show their occupation.

On the trading point, there was not evidence to support that this sale, purchase and redevelopment was a trading venture. This was despite HMRC highlighting the involvement of a property developer at the purchase stage, which could have indicated otherwise.

Eyre & Anor v HMRC [2025] UKFTT 461 (TC)

From Tax Update May 2025, published by S&W Partners LLP

Appeal allowed on SDLT overpayment relief claim

The First-tier Tribunal (FTT) has allowed a taxpayer’s appeal on a stamp duty land tax (SDLT) claim of almost £2m, following the failure of his efforts to appeal it in another way at the Court of Appeal.

Though an FTT case, this is not the first appearance of this SDLT issue in court. The taxpayer paid SDLT on the basis that a contract was substantially performed. On rescission of the contract, he sought repayment by way of amending the return. The Court of Appeal has since upheld HMRC’s view that the time limit for amendment had been missed, though had he made the amendment in time it would have been valid.

At the FTT, he attempted to claim relief under a different section with a longer time limit, which he had submitted a claim within. HMRC submitted that, under this section, SDLT must have been overpaid originally, whereas here it was only found to be overpaid later, on rescission of the contract, and that the section under which his previous claim had failed was the only means by which he could have claimed relief. Only the latter point was taken at the hearing.

The FTT found for the taxpayer. On review of the legislation, technical note and explanatory notes, it concluded that this section could act as a backstop, a final statutory remedy. The taxpayer’s appeal was allowed.

Candy v HMRC [2025] UKFTT 416 (TC)

From Tax Update May 2025, published by S&W Partners LLP

Taxpayer wins appeal on multiple dwellings relief

Following a string of HMRC wins on stamp duty land tax (SDLT) multiple dwellings relief (MDR) claims, a taxpayer has won an appeal at the First-tier Tribunal (FTT) that a house and annexe were separate dwellings.

The taxpayer bought a property with annexe, and initially paid SDLT as though this were one dwelling. The taxpayer was unaware of the existence of MDR at the time of purchase. HMRC enquired into her later amendment on which she claimed MDR.

There was a door linking the annexe and main house, but this was lockable from both sides, fireproof and soundproof. The annexe had its own external door with path leading to it, a kitchen and fully equipped shower room. The heating was independently controlled, though the boiler was shared, and the annexe had its own means to shut off water, and its own fuse box. There was no separate address, council tax registration or utility meters. 

On the balance of probabilities, the FTT found that the annexe and main house were separate dwellings. It had the necessary amenities for independent habitation, and it was not unusual for utilities to be included in the rent for a separate property, so the joint utilities were not a barrier to renting it out.

Behenna-Renton v HMRC [2025] UKFTT 403 (TC)

From Tax Update May 2025, published by S&W Partners LLP