UK and International Tax news

Court of Appeal Reverses Decision Of Upper Tribunal In Corporate Residence Case

Wednesday 23rd December 2020

The Court of Appeal has recently restored the decision of the FTT, reversing the decision of the Upper Tribunal, in a case involving three Jersey companies which had entered into an arrangement to crystallise enhanced capital losses with indexation allowance, on the basis the companies were centrally managed and controlled in thew UK.

In Development Securities (No 9) Limited & Othrs [TC06007/2017], the appellants appealed against decisions made by HMRC in October 2014 which denied the appellants the benefit of indexation allowance increasing capital losses on the disposal by the appellant in 2004 of certain assets.

The assets were disposed of as part of the implementation of a plan designed by advisers to enable the property development and investment group of companies of which Development Securities Plc was a member to crystallise latent capital losses on the assets on the basis that indexation would be available which required the Jersey companies to be resident in Jersey when the assets were transferred intra group from the UK group companies.

The Jersey companies were granted options to acquire the assets at original cost plus indexation from the UK companies despite the assets standing at a loss as their values had fallen since original acquisition.

The FTT had concluded that the key decisions to acquire the assets at an overvalue and then to move the control of the Jersey companies back to the UK were taken by the parent company DS Plc in the UK. As such, central management and control of the Jersey companies took place in the UK and therefore they were resident in the UK in the relevant period.

On appeal in 2019, the UT overturned the FTT decision finding that the Jersey companies were centrally managed and controlled in Jersey and were not UK resident.

The Court of Appeal has now reinstated the FTT’s findings in favour of HMRC. Richards LJ held in particular that the decision to enter into the relevant transactions was taken by the parent company in the UK and not by the directors in Jersey.

For further information on this case please contact Keith Rushen on 0207 486 2378.


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