UK taxes had not been paid by the overseas company paying a dividend, but had been by the UK companies in which it held shares. The dividends received by the taxpayer were preference dividends rather than ordinary dividends, and were therefore paid at a fixed rate, undiminished by the taxes paid by the UK companies.
Held: The taxpayer had been correctly assessed on the full amount of the dividend.
Notwithstanding the concept of ‘franked’ dividend income, the income received by the shareholder was not the same income as that of the company.
Lord Wright explained: ‘The English company is taxed on the balance of its profits or gains, that is on its income; the shareholder is taxed on his own income. The shareholder is never taxed on the company’s fund of profits, but only on the dividend which comes to him in payment of the debt which is created when the company declares the dividend. The tax is in every case on the individual’s income, not on a fund possessed by another person, the company, even though it is the fund of profits of that company, from which the individual’s income or part of it will be paid. … This principle must not be obscured by reason of the circumstance that in the way already noted, the dividend is treated as franked by the tax paid by the company. The fund which is taxed in the hands of the company and the dividend which is declared by the company in favour of the shareholder are separate items for taxation law. It is only the latter which is the shareholder’s income.’
Lord Wright
[1940] AC 81
England and Wales
Citing:
Limited – Gilbertson v Fergusson CA 1881
. .
Cited by:
Cited – Anson v Revenue and Customs SC 1-Jul-2015
Interpretation of Double Taxation Agreements
This appeal is concerned with the interpretation and application of a double taxation agreement between the United Kingdom and the United States of America. A had been a member of an LLP in Delaware, and he was resident within the UK, but not . .
Lists of cited by and citing cases may be incomplete.
Updated: 26 October 2021; Ref: scu.573169 br>