Alexander Beard v The Commissioners for HMRC

In determining the tax treatment of payments from a non-UK company, the character of the payment under the paying company's corporate law is established, then UK tax legislation is applied.

FTT Decision, paragraph [47]

Section 402 ITTOIA 2005 charges income tax on dividends of non-UK resident companies, excluding dividends of a capital nature.

ITTOIA 2005, Section 402

The meaning of "dividend" in tax legislation is determined by its ordinary meaning under English law, considering what the company is permitted to do under its governing law.

First Nationwide v HMRC [2011] STC 1540 (UT), paragraphs [23], [38], [48]

A distribution is considered a dividend if it is made by the same mechanism as a dividend paid from trading profits.

First Nationwide v HMRC, paragraphs [38], [50], [54]

The determination of whether a dividend is of a capital nature is a matter of UK law, focusing on the character of the dividend, not the source of funds.

Case Law Discussion, paragraphs [47], [54], [69]

The 'machinery of distribution' test determines whether a distribution is capital or income. If the mechanism used is for reducing capital (e.g., Part 12 CJL 1991), it is capital; otherwise, it's income.

First Nationwide v HMRC [2012] EWCA Civ 278, paragraphs [55], [59], [68], [69]