The Tax Tribunal may have shaken up the established test for company non-residence.
A company which is incorporated outside the UK will become UK resident if its central control and management is based in the UK. The rule of thumb for tax planners has therefore been to ensure that all board meetings, decisions and resolutions are made offshore, this was confirmed in Wood v Holden [2006] STC 443.
Now, in a recent tax case, Laerstate BV v HMRC [2009] UKFTT 209 (TC) the UK Tax Tribunal has decided that company residency cannot be established on such simplistic terms. Instead it looked behind the mere location of board meetings and found that a company should be resident in the place that it had been doing all its real business, including contract negotiations and obtaining its advice. In this case this was within the UK, which made the company resident in the UK. Rubber stamping board minutes by having a board meeting abroad does not it seems, magically shift the management of a business overseas.
Rupert Shiers and James Duncan of McGrigors LLP, reporting the case in Tax Adviser magazine, suggest that the Tribunal is now moving to a more substantive test for company residency “...the whole picture must be considered in each case”.
The company has lodged an appeal though, so we must wait and see.
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