UK: England and Wales: an investment company?

Judgment was given earlier this week in Dawsongroup Plc v Revenue & Customs [2010] EWHC 1061 (Ch). The case concerned a company - Dawsongroup plc - the holding company for a group of companies carrying on the business of renting trucks, trailers, buses, coaches and other specialist equipment. The company undertook two activities: [1] providing services to the subsidiary companies (including banking, financial, legal and IT services) and [2] holding the shares of the subsidiary companies and arranging the affairs of the group (which included the disposal and acquisition of companies, the general control of the subsidiaries to ensure the maintenance of their value, and receiving income from the subsidiaries in the form of dividends).

Last year, in the First-tier Tribunal (Tax) (see [2009] UKFTT 137 (TC)) it was held that the company was not an investment company, defined by Section 130 of the Income and Corporation Taxes Act (1988) as "any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom...". As such, the company was unable to deduct certain expenditure under Section 75 of the 1988 Act when calculating its profits for corporation tax purposes.

The company appealed. Mann J. heard the appeal and held that the company was an investment company although, for other reasons, the disputed expenditure was not deductible. In holding that the company was an investment company, Mann J. held that the First-tier Tribunal judge had incorrectly decided that the company's exercise of control over the subsidiaries was a trading activity. HMRC argued that the company's investment activity was ancillary to its main trading activity of providing services. Mann J rejected this argument because it failed to describe the company's raison d'être and the overall picture of its functions. He instead found that the company was "primarily a holding company ... which also happens to provide services to the rest of the group ... its main activity is being a holding company with a degree of real control over the rest of the group" (para. [39]).

UK: Corporation Tax Act (2010) - explanatory notes published

Explanatory notes for the Corporation Tax Act (2010) were published yesterday on the OPSI website: see here (pdf). Tables of destinations and origins have also been published: see, respectively, here (pdf) and here (pdf).

UK: Corporation Tax Act 2010 published

A copy of the Corporation Tax Act 2010 has been published on the OPSI website: see here (pdf). The Act comes into force on 1 April 2010 although some sections are already in force (see Section 1184 for further information).

UK: Parliamentary Bills update

The Corporation Tax Bill received Royal Assent earlier this week: see here. The Bill, now an Act, will soon be published on the OPSI website. It largely completes the Government's rewrite of the corporation tax code and is the sixth Act produced by the Tax Law Rewrite Project.

The Bribery Bill, which was introduced in the House of Lords, received its Second Reading in the House of Commons on Wednesday: see here. This provided MPs with their first opportunity to debate the Bill. Background information about the Bill, covering debate in the Lords, is available in a House of Commons Library research paper published on 1 March: see here (pdf).

UK: corporation tax, small companies' rate - proposed reform to the associated companies' test

HM Treasury and HMRC have published a consultation paper setting out a proposed new test for determining whether companies are associated for the purposes of the small companies' rate of corporation tax. Where a company is deemed to be associated with other companies the corporation tax thresholds are reduced. The purpose of reform (to quote from the consultation paper (at para. 3.3):

... is to provide a test that retains those aspects of the current test that work well within a new test that attributes rights held between linked persons only in circumstances where actual links between the companies make it appropriate to do so. Put broadly, the new test seeks to ensure that companies cannot be associated by an attribution of rights by mere ‘accident of circumstance’".

UK: Controlled Foreign Companies taxation regime proposals published

Yesterday HM Treasury published a discussion paper setting out its proposed framework for the Controlled Foreign Companies taxation regime: see here (pdf).