Chapter INTM120210

CourtHM Revenue & Customs
Published date09 April 2016
Record NumberINTM120210

ITH300 Company residence: the law: basic residence rule
ITH301 Company residence: nature of a company: company law
ITH302 Company residence: company law: growth of the company
ITH303 Company residence: law: company not the agent of its members
ITH304 Company residence: law: company and partnership distinguished
ITH305 Company residence: company law: constitution of a company
ITH309 Company residence: incorporation and residence: early days
ITH310 Company incorporation/residence: early days: Calcutta Jute Mills
ITH311 Company incorporation/residence: early days: Egyptian Delta Land
ITH314 Company residence: true meaning of residence: De Beers
ITH315 Companies: true meaning of residence: De Beers: question of fact
ITH316 Company residence: legal power to manage and control
ITH317 Company residence: legal power to manage/control: with directors
ITH318 Company residence: power to manage/control: managing director
ITH319 Company residence: legal power to manage/control: foreign law
ITH323 Company residence: legal control overridden: Unit Construction
ITH327 Company residence: difficulties: central management/control test
ITH328 Company residence: looking at the command structure
ITH329 Company residence: command structure: three levels of management
ITH330 Company residence: executive/non-executive directors
ITH331 Company residence: command structure: pinnacle doctrine
ITH334 Company residence: the reality
ITH335 Company residence: parent subsidiary relationship
ITH338 Companies: dual residence: domestic law
ITH339 Companies: dual residence: peripatetic companies: reports to HO
ITH343 Company residence: Case V trade: UK central management control
ITH344 Company/foreign partnership: Case V: UK central management control
ITH347 Company residence: proposed new management test
ITH348 Company residence: proposed new test: place/effective management
ITH349 Company residence: proposed new management test: abandoned
ITH350 Company residence: first Statement of Practice
ITH356 Company residence: incorporation rule
ITH357 Company residence: incorporation rule: reasons for the rule
ITH358 Company residence: incorporation rule: effect of the rule
ITH359 Company residence: incorporation rule: exceptions
ITH360 Company residence: second Statement of Practice
ITH365 Company residence: incorporation rule/treaty non-residents
ITH366 Company residence: the problem
ITH367 Company residence: legislation against treaty
ITH368 Company residence: general solution
ITH371 Company residence: European company
ITH400 Company residence: consequences of law
ITH401 Companies: Treasury consent: migrations/transfers of business
ITH402 Companies: migrations/business transfers: Treasury consent: why needed
ITH403 Companies: migrations/business transfers: Treasury consent: later need
ITH404 Companies: Treasury consent: migrations: Daily Mail Trust
ITH407 Company residence: exit charge
ITH408 Company residence: exit charge: roll-over relief
ITH409 Company residence: exit charge: postponement of charge
ITH413 Company residence: safeguarding collection
ITH419 Company residence: loss importation
ITH420 Company residence: loss importation: the branch
ITH421 Company residence: loss importation: the branch: example
ITH422 Company residence: loss importation: branch closes down: example
ITH423 Company residence: loss importation: the subsidiary
ITH424 Company residence: loss importation: the subsidiary: example 3A
ITH425 Company residence: loss importation: the subsidiary: example 3B
ITH426 Company residence: loss importation: the subsidiary: example 3C
ITH427 Company residence: loss importation: the subsidiary: example 3D
ITH 427 Company residence: loss importation: the subsidiary: example 3D
ITH429 Company residence: loss importation: branch and subsidiary
ITH430 Company residence: loss importation: effect of Section 249
ITH437 Company residence: getting profits back tax free
ITH438 Companies: getting profits back tax free: inward migration
ITH442 Company residence: advantage of central management/control test
ITH445 Company residence: nowhere companies before incorporation rule
ITH446 Company residence: successors to the nowhere company
ITH449 Company residence: incorporation rule and Treaty Non-Residents
ITH450 Company residence: treaty migration
ITH451 Company residence: other anti-TNR provisions
ITH452 Company residence: companies undergoing forced migration
ITH453 Company residence: other consequences of FA94 S249

The following reproduces the guidance on the law and the consequences of the law which was originally published in the International Tax Handbook which was withdrawn in October 2008. This guidance is still relevant if considering the central management and control test insofar as it describes the development of the UK rules and summarises relevant case law.

Please note that this material may refer to other chapters in the International Tax Handbook which have been removed.


ITH300 Company residence: the law: basic residence rule

There has never been a statutory definition of what makes a company resident for the general purposes of the Taxes Acts. Yet it has long been recognised that the residence of a company is determined according to where its central management and control is to be found. That is still so even though since 1988 a company incorporated in the United Kingdom is, with some exceptions, regarded as resident in the United Kingdom for the purposes of the Taxes Acts. That rule overrides but does not eliminate the test of central management and control.

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ITH301 Company residence: nature of a company: company law

This chapter is concerned with the concept of company residence, the development of the central management and control principle and the role played by incorporation. But before these matters can seriously be examined it is necessary to consider the real nature of the company, what it is, how it is created and what are the mechanisms whereby it is managed and controlled; to do that involves company law. That means primarily company law of the United Kingdom. The management and control test is relevant to all companies including those incorporated abroad. We see later (ITH319) how foreign company law is relevant when a company incorporated abroad is being considered. But the case law from which the test derives concerns companies which were incorporated either in the United Kingdom or in countries such as the former Dominions with similar company law. The Companies Acts to which reference will be made are those which run in England and Wales and, for the most part, Scotland. Northern Ireland has equivalent law. Company law is a large subject and for the present purpose our interest can be confined to those aspects of it which are relevant to company residence. Company law, like Income Tax law, has evolved and to understand the judgments in some of the Tax Cases, it is important to know, at least in outline, something of that process of evolution. Most companies have been created through the process laid down in the Companies Acts and the first Act to bear that name became law in 1862. By that time the Income Tax Act had been established for twenty years and it is accordingly necessary to look back to the time before that first Companies Act to understand the state of things when our Income Tax Act 1842 was written.

In the 1842 Act, as in later Income Tax Acts, it was the residence of persons which had to be considered. The idea of corporate personality is very old. It is sometimes expressed by referring to a company as a legal person, that is to say an entity which has legal rights and legal obligations quite distinct from those of the people who make up its membership. While that is a reasonable enough way of expressing the idea it must be remembered that the members, natural persons, are also legal persons. What we really mean when we call a company a legal person is that it has been created by the artifice of law rather than by natural birth. Until 1844 it was very difficult and expensive to acquire corporate personality. It could be done, speaking very broadly, only by Royal Charter or under the provisions of a special Act of Parliament.

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ITH302 Company residence: company law: growth of the company

Thus when the Income Tax Act appeared or, more correctly, reappeared in 1842 there were very few true trading corporations and businessmen formed partnerships or resorted to a vehicle known as the unincorporated company. This was a curious entity with some of the characteristics of what we would call a company. In fact it was a sort of half-way house between a corporation and a partnership. It is bodies of that kind which explain the reference in ICTA88/S832 (1), in the definition of `body of persons’, to `any company, fraternity, fellowship and society of persons whether corporate or not corporate’. The definition of `company’ in Section 832(1) dates from 1965 with the introduction of CT and includes a similar reference to unincorporated associations. There are today comparatively few unincorporated associations and they are, generally speaking, members’ clubs such as the local cricket club. The word `company’ has no precise legal meaning and is still loosely applied to partnerships. The Section 832(1) definition of `company’ however states explicitly that the term does not include a partnership.

To us the word company normally means a company incorporated under the Companies Act and we have now a very large number of truly corporate bodies. The Companies Act of 1862, the forerunner of today’s Companies Act, was not entirely an innovation. It consolidated important developments that had taken place after the introduction of our Income Tax Act of 1842. The true father of the modern company was Gladstone who, as President of the Board of Trade, introduced the Joint Stock Companies Act of 1844. That Act drew a clear distinction between partnerships and companies and...

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