In HMRC v Development Securities plc [2020] EWCA Civ 1705 (15 December 2020) the Court of Appeal overturned the decision of the Upper Tribunal (UT) and reinstated the FTT’s decision that three Jersey-incorporated special purpose vehicles that were subsidiaries of a UK-resident parent company were centrally managed and controlled and therefore tax resident in the UK (and not in Jersey as the UT had concluded).
The Jersey subsidiaries were incorporated for the purpose of implementing a tax avoidance plan to enable the group to crystallise latent capital losses on certain assets. The scheme was intended to operate as follows. By exercising an option the assets (standing at a loss) were acquired by the Jersey subsidiaries at substantially more than market value while the subsidiaries were resident in Jersey. Shortly after acquiring the assets the Jersey subsidiaries would become UK tax resident after which they...
