Companies are associated

Kellogg Brown & Root Holdings Ltd a UK-resident wholly-owned subsidiary of H Co a US multinational acted as the holding company for various UK subsidiaries.

In 1995 a corporate reorganisation took place to the effect that shares in two of Kellogg’s subsidiaries were transferred to a new UK-resident company HHUKL which was a subsidiary of a new US company HIG.

Kellogg made a loss on the sale of these shares and claimed to offset the loss against subsequent chargeable gains. HMRC refused the claim on the basis that Kellogg and HHUKL were connected persons within TCGA 1992 s 18(3).

The taxpayer appealed to the Special Commissioner and subsequently to the High Court. Both appeals were dismissed. The taxpayer appealed and the taxman cross-appealed.

The Court of Appeal confirmed the previous courts’ decisions. With regard to...