Supreme Court refuses permission in Development Securities

A year ago we wrote about the Court of Appeal’s decision in Revenue and Customs Commissioners v Development Securities plc and others [2020] EWCA Civ 1705, in which the Court considered the corporate test for residence in circumstances where a subsidiary company was effectively acting on the instructions of its parent.

The First-tier Tribunal (the FTT) had concluded that the Jersey-based subsidiary was centrally managed and controlled (and resident for tax purposes) in the UK. The Upper Tribunal (the UT) overturned that decision, finding that the FTT had misunderstood the nature of the transactions and the duties of the directors.

The Court of Appeal rejected the UT’s criticisms and restored the decision of the FTT. However, this did not mean that the judges simply agreed with the FTT. Nugee LJ in particular noted that he had "very considerable reservations" with the FTT’s reasoning. As a result, the Court of Appeal’s decision has left questions as to the application of the test for residence in these circumstances.

Late last year, the Supreme Court refused permission to appeal in the case, and so the question of how the FTT should have applied the test will go unanswered in this case. As a reason for refusal, the Supreme Court cited that the case was “limited to its particular facts”. In reality, that is true of any corporate residence test which will require consideration of the facts of that case, but taxpayers can nonetheless benefit from guidance as to how the test is applied. Clearly, however, the Supreme Court considered that this was not the case to provide that guidance and it is difficult not to see the Supreme Court’s view as yet further reason to conclude that this is a case that stands on its own.

See our previous article on the Court of Appeal’s decision in Development Securities.