Practical points 2019 - Business tax
Guidance from ICAEW's Tax Faculty for practitioners on the latest developments in policy, practice and legislation related to business taxes and reliefs, including: capital allowances; cash basis; corporation tax; entrepreneurs relief; and self-employed taxation. These brief practical points are published each month in the faculty's magazine TAXline.
The Upper Tribunal (UT) has reversed the decision of the First-tier Tribunal (FTT) in Development Securities plc and others v HMRC on corporation tax residence. The taxpayer companies were incorporated as part of a tax planning scheme intended to further increase an underlying capital loss to reflect indexation. The Jersey-incorporated companies would acquire the capital assets standing at a loss from a UK group company for consideration equal to base cost plus indexation (ie, much more than market value). The companies would then migrate tax residence to the UK, and then crystallise large capital losses through commercial sales to third parties. To succeed, the planning required that the Jersey companies were not UK tax resident on the date of acquisition of the assets.
This change has caused a considerable level of anxiety as it excludes owners of alphabet shares where dividends have not been paid equally to the shareholders. The papers released at the time of the Autumn Budget indicated that about 1,000 companies would be affected by the change, but we estimated it would be considerably more than that. It seemed therefore that the way the clauses had been drafted had unintentionally cast the net considerably wider than the policy had intended.