Jersey companies found to be UK resident by the Court of Appeal

In HMRC v Development Securities, the Court of Appeal has overruled the Upper Tribunal and agreed with the First-tier Tribunal that the relevant Jersey incorporated subsidiaries of a UK parent were resident in the UK for tax purposes by reason of being centrally managed and controlled in the UK.

While of considerable interest, it should be remembered that the question of where a company is centrally managed and controlled is principally one of fact and so different facts might yield a different conclusion.

What the Court of Appeal’s decision shows is that the line between non-UK and UK residence can be a fine one when it depends on whether the overseas company’s directors gave due consideration to the transaction as a whole or just to a small element of it, and that, accordingly, non-UK company boards should always make sure that they give proper consideration to the transaction as a whole, albeit informed by advice or recommendations that they might have received from the UK, to minimise the risk of being treated as UK resident.

The decision has yet to be appealed to the supreme court.