Gould v Revenue And Customs Gould v Revenue And Customs (Interim dividend - payment to shareholders on different dates - whether later dividend due and payable when first dividend paid - no) [2022] UKFTT 431 (TC) (01 November 2022)

Gould v Revenue And Customs Gould v Revenue And Customs (Interim dividend - payment to shareholders on different dates - whether later dividend due and payable when first dividend paid - no) [2022] UKFTT 431 (TC) (01 November 2022)

The Tribunal held that the payment of an interim dividend to one shareholder does not, by itself, make the dividend due and payable to another shareholder of the same class for tax purposes. Article 104 of Table A does not create an enforceable debt in these circumstances, and the Doherty case was not followed. The appellant's dividend was only due and payable when actually paid to him. Even if a debt had arisen, the shareholders had agreed to vary their rights under the Duomatic principle, or the appellant had waived his right to simultaneous payment. Therefore, the dividend was taxable in the year it was actually paid to the appellant.

Citation
[2022] UKFTT 431 (TC)
Parties
Appellant: Peter Gould; Respondents: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
01 November 2022
Procedural Posture
Tax Appeal / First Tier Tribunal (tax) Judgment
Outcome
Appeal allowed
Legal Topics
Interim Dividends, Taxation of Dividends, Shareholder Rights, Company Articles of Association, Duomatic Principle, Waiver of Rights, Unfair Prejudice Under Companies Act 2006
Tax Law Company Law Interim Dividends Taxation of Dividends Shareholder Rights Company Articles of Association Duomatic Principle Waiver of Rights +1 more

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Parties

Peter Gould

Appellant

The Commissioners for His Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal (tax) Judgment

Legal Issues

  1. 1 Whether an interim dividend paid to one shareholder creates an enforceable debt to another shareholder of the same class for tax purposes when paid to the first shareholder.
  2. 2 Whether the appellant's dividend was 'due and payable' for tax purposes on the date paid to his brother or only when actually paid to him.
  3. 3 Whether the Duomatic principle or waiver applied to vary or waive the appellant's rights to simultaneous payment.

Ratio Decidendi

The Tribunal held that the payment of an interim dividend to one shareholder does not, by itself, make the dividend due and payable to another shareholder of the same class for tax purposes. Article 104 of Table A does not create an enforceable debt in these circumstances, and the Doherty case was not followed. The appellant's dividend was only due and payable when actually paid to him. Even if a debt had arisen, the shareholders had agreed to vary their rights under the Duomatic principle, or the appellant had waived his right to simultaneous payment. Therefore, the dividend was taxable in the year it was actually paid to the appellant.

Court Disposition

Appeal allowed

Orders

  • HMRC's closure notice is set aside; the dividend is taxable in the year it was actually paid to the appellant (2016-17).