Dividend is income

Following a share reorganisation the trustees of the Raymond Taube 1991 Discretionary Settlement received a special dividend of £240 000.

At the behest of their advisers the trustees treated the dividend as trust capital rather than as being available for distribution. HMRC opened an enquiry into the settlement amended the relevant tax returns and issued assessments on the basis that the dividend was income.

The taxpayer appealed.

The First-tier Tribunal noted that generally company profits distributed as dividends to trustees are considered trust income. In this instance there was nothing in the trust deed that said a special dividend should be capital.

Therefore monies paid by way of the special dividend to the trustees would be trust income.

The appellant argued that the special dividend was exceptional in terms of amount and reduced the value of the shares as an investment ...