PLC - Companies - UK residence and permanent establishments Flashcards
What are the two tests for determining whether a company is UK tax resident?
The “incorporation test” and the “central management and control test”.
What is the incorporation test for the purposes of determining whether a company is UK tax resident?
Under section 14 CTA 2009, a company that is incorporated in the UK is resident in the UK for UK tax purposes, subject to the operation of any applicable double tax treaty.
Is the question of whether a company is centrally managed or controlled in the UK a question of fact or a question of law?
A question of fact (Bullock v Unit Construction Company [1959]).
Which HMRC statement of practice provides guidance on whether a company is centrally managed and controlled in the UK”?
SP 1/90.
Does the central management and control test for the purposes of determining a company’s residence look at day-to-day management or the highest level of control?
The highest level of control - ie board control and not shareholder control (see American Thread Company v Joyce [1912]).
Does the central management and control test for the purposes of determining a company’s residence look at the whole course of the company’s business or specific instances of management?
The whole course of the company’s business (see Laerstate BV v HMRC [2009]).
For the purposes of determining a company’s residence under the central management and control test, is it necessarily where the board of directors meet?
Not necessarily. In News Datacom v Atkinson [2006], the SpC held that meetings in the UK in that case were purely housekeeping in nature and not where central management and control took place.
What 3 situations did the CA in Wood v Holden allude to in the context of central management and control of a company?
Situations where (1) CMAC is retained by the company and a third party merely influences the decisions of the directors, (2) CMAC has not been usurped but a third party dictates the decisions of the directors and (3) situations where CMAC has been usurped by a third party.
Can central management and control of a company be exercised by professional directors such as banks and trust companies at the place where they make their decisions?
Yes (see Wood v Holden where CMAC was exercised by ABN Amro on the facts).
In what circumstances may a parent exercise central management and control of a subsidiary?
Where the board of directors of the subsidiary merely rubber stamps decisions taken by the parent without considering the matter independently.
Does an element of tax avoidance make any difference to the central management and control test?
No (see Wood v Holden).
Is the “place of effective management” under a treaty tie-breaker the same as central management and control for the purposes of the UK corporate residence test?
No. SP1/90 states that EM may be found in a different place to CMAC where a company is run by executive directors in one country (location of EM) who are subject to the final directing power of a controlling board that meets in another country (location of CMAC).
When is a company ‘dual-resident’?
If it is resident in the UK and another territory (under the domestic law of that territory) and there is no tie-breaker in the relevant double tax treaty or where such a clause does not resolve the issues).
Is a non-resident company subject to UK corporation tax if it is trading with the UK as opposed to in the UK?
No.
How do HMRC determine whether a company is trading in or with the UK?
They look at where the operations take place from which, in substance, the profits of the company arise (Greenwood v Smidth [1922]; Firestone v Llewellin [1957])).
