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Special purpose subsidiaries

Special purpose subsidiaries

TaxWatch

TaxWatch

Access KPMG's client-only portal of publications on topical tax issues.

Sharon Burke reviews a recent UK decision in the Upper Tier Tribunal (UTT) that considers the locus of central management and control of special purpose subsidiary companies. In this article, Sharon considers the tests applied by the UTT in forming its conclusions on where central management and control was exercised by Jersey incorporated companies. This test is essentially the same as that applied for Irish tax purposes in determining the tax residence status of a non-Irish incorporated company.

The tribunal found for the taxpayer in its assessment that the paramount authority relating to decisions on the companies’ affairs had not been abdicated by the boards of directors in Jersey and that they had exercised central management and control in Jersey. This was found notwithstanding the instructions issued by the parent company to the boards of directors of the companies and the influence exercised by the parent company over the boards. The finding of the tribunal was necessarily based on a close review of the facts of the case which centred on UK tax planning. However, the analysis relating to the place of exercise of management and control is relevant for Irish parent companies in considering if foreign subsidiaries which effect transactions and make business decisions that are aligned with the wishes of the parent company could be considered to be resident in Ireland for corporation tax purposes.

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