What's your motive?

SIMON WHITEHEAD considers the future of the motive test in the controlled foreign company legislation.

THE EUROPEAN COURT'S decision delivered on Tuesday 12 July in the Cadbury Schweppes case (Cadbury Schweppes plc v CIR (and related appeals) Case C-196/04) goes some way to answering the questions left by the Advocate General's opinion received in May (see Taxation 11 May 2006 page 153). On its face the ruling produces the result regarding the compatibility with community law of the UK's controlled foreign company (CFC) provisions which the Advocate General had recommended namely that the case should return to the Special Commissioners for an assessment of whether the motive test can be applied in a way compliant with community law. Yet the Court's approach to the issue would seem to allow far less scope for the uncertainty feared by the leading commentators mentioned in the Taxation report.