Court of Appeal reinstates First-tier Tax Tribunal’s decision that Jersey-incorporated subsidiaries were resident in the United Kingdom for tax purposes

In HMRC v Development Securities Limited [2020] EWCA Civ 1705, the Court of Appeal has overturned a decision of the Upper Tribunal that three wholly owned subsidiaries of Development Securities Plc were resident in Jersey, reinstating the decision of the FTT that the companies were resident in the UK for tax purposes. 

The judgment is the first time the Court of Appeal has considered the issue of company residence since Wood v Holden [2006] 1 WLR 1393.  The Court of Appeal stated that the “overarching principle” remains that set out by the House of Lords in De Beers Consolidated Mines Ltd v Howe [1906] AC 455 that a company resides for tax purposes where its real business is carried on, and that is where central management and control (“CMC”) actually abides. That principle applies in relation to subsidiaries, including special purpose vehicles.  Events before or after the particular date in question may be relevant as casting light on the position on that date.  The Court of Appeal also emphasised that where a company is resident is essentially a question of fact.

The Court of Appeal allowed HMRC’s appeal, on the grounds that:

  • the Upper Tribunal had misunderstood and mischaracterised the basis of the FTT’s decision that CMC abided in the UK;
  • the Upper Tribunal had erred in focussing on whether the directors of the Jersey companies acted in breach of their duties as directors; and
  • the Upper Tribunal was not justified in setting aside the FTT decision for the reasons it gave.

Akash Nawbatt QC and Kate Balmer appeared for HMRC. 

Click here to read the full decision. 

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