Central management and control of companies

A group of companies implemented a plan intended to crystallise latent capital losses. It was essential to its operation that the companies were resident in Jersey from the date of their incorporation until 20 July 2004. The issue was whether the Jersey companies were UK tax resident in that period as claimed by HMRC.

The First-tier Tribunal dismissed the taxpayers’ appeal so the matter progressed to the Upper Tribunal.

The judges said: ‘The mere fact that a 100% owned subsidiary carries out the purpose for which it is set up in accordance … even instructions of its parent does not mean that central management and control vests in the parent.’ It was necessary to distinguish between influence over the subsidiary and control of the subsidiary. The place of central management and control was where it was found not where it ought to be. The ‘substance and not the...