Development Securities PLC and Others v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Marcus Smith,Judge Brannan |
| Neutral Citation | [2019] UKUT 0169 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,5 June 2019 |
| Date | 05 June 2019 |
| Published date | 05 June 2019 |
[2019] UKUT 0169 (TCC)
Appeal number: UT/2017/0170
CORPORATION TAX – whether certain companies were resident outside the
United Kingdom – residence outside the United Kingdom essential for tax
planning – the test for “residence”
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
(1) DEVELOPMENT SECURITIES plc
(2) DEVELOPMENT SECURITIES (No 9) LIMITED
(3) DEVELOPMENT SECURITIES (No 18)
LIMITED
(4) DEVELOPMENT SECURITIES (No 25)
LIMITED
(5) DS JERSEY (No 1) LIMITED
(6) DS JERSEY (No 2) LIMITED
(7) DS JERSEY (No 3) LIMITED
Appellants
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
The Honourable Mr Justice Marcus Smith
Judge Guy Brannan
Sitting in public at The Rolls Building, Fetter Lane, London EC4A 1NL on 4, 5, 8
and 9 April 2019
Sam Grodzinski, QC and Julian Hickey, instructed by Levy & Levy, for the
Appellants
Akash Nawbatt, QC and Kate Balmer, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2019
DECISION
A. INTRODUCTION
1. In October 2014, the Respondents to this appeal, the Commissioners for
Her Majesty’s Revenue and Customs (“HMRC”), denied the Appellants the
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benefit of various capital loss relief provisions in the Taxation of Chargeable
Gains Act 1992 (“TCGA”) on the disposal by the Appellants in 2004 of certain
assets, which we refer to as the “relevant assets”.
2. The relevant assets were disposed of pursuant to a plan, designed by
PricewaterhouseCoopers (“PwC”), intended to enable the Appellants to
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crystallise latent capital losses on the relevant assets on the basis that indexation
would be comprised in the loss. We shall refer to this plan as the “Scheme” and
describe it in greater detail below.
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3. The Fifth, Sixth and Seventh Appellants – respectively, “DS1”, “DS2” and
“DS3”, together the “Jersey Companies” – were incorporated in Jersey for the
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purposes of the Scheme. The Jersey Companies were incorporated as subsidiaries
of the First Appellant, Development Securities plc. Development Securities plc
is part of a property development and investment group of companies (the
“Development Securities Group” or “DSG”). The relevant assets were assets held
by DSG companies incorporated and resident in the United Kingdom. The
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intention was that the relevant assets would be acquired by the Jersey Companies
pursuant to the Scheme.
4. It was essential to the operation of the Scheme that the Jersey Companies
not only be incorporated in Jersey, but resident there (and not resident in the
United Kingdom) for corporation tax purposes from the date of their
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incorporation until 20 July 2004.
5. HMRC determined that the Appellants could not benefit from the capital
loss relief provisions in the TCGA because the Jersey Companies were in fact
resident in the United Kingdom for tax purposes in June and July 2004. For that
reason, the intended tax advantages of the Scheme failed.
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6. The Appellants appealed HMRC’s decision to the First-tier Tribunal (Tax
Chamber) (the “FTT”). In a decision dated 14 July 2017 (the “Decision”), the
FTT decided that the Jersey Companies were tax resident in the United Kingdom
at the material times. The Appellants’ appeal was, therefore, dismissed. With the
permission of the FTT, given on 16 November 2017, the Appellants appeal to this
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tribunal.
7. Appeals to this tribunal are on points of law only. Both the Appellants and
HMRC accepted that the question of a corporation’s residence is essentially a
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See paragraphs 24 to 27 below.
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