HM Revenue & Customs is on the hunt for company residence cases to
litigate, even if the key facts of such cases appear to be in the taxpayer’s
favour, advisers from PricewaterhouseCoopers have said.
In a briefing paper Jane Thomson and Simon Wilks, from PwC’s UK tax
investigation team, said that after HMRC’s defeat in the Wood v Holden case on
corporate residence, the taxman was chasing other similar cases in the hope of
easing the impact of the loss.
‘HMRC is continuing in its attempts to find company residence cases to
litigate in the hope of diluting the impact of its defeat in Wood v Holden… It
seems HMRC is prepared to investigate, and to litigate, even in cases where key
relevant facts are favourable to the taxpayer,’ Thomson and Wilks said.
The case dealt with the sale of Hong Kong news company News Data Security
Products (NDSP) to its UK subsidiary News Datacom. NDSP was 60% owned by a UK
group, but its directors were mainly non-UK residents and all but one of its
board meetings were held outside the UK.
HMRC pursued NDSP for additional tax upon its sale because of an ‘executive
committee’ which had been appointed by the board and convened in the UK; and a
shareholder agreement that required shareholder approval for certain
The revenue argued that because of the committee and the shareholder
agreement NDSP was not controlled by its directors and was thus a UK-resident
The Special Commissioners rejected this argument and found that NDSP was
controlled by its directors, but did not rule out the possibility that other
such shareholder or executive committee arrangements could classify companies as
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