Wood and ANR vs Holden (2006) EWCA GO68 Court of Appeal - UK

1
Wood and ANR vs Holden
(2006) EWCA GO68Court of Appeal - UK
Case Study 4
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Facts

• Mr. and Mrs. Woods, UK residents, settled various
  trusts.
• Trustees incorporated a company CIL in BVI.
• Woods gifted shares of H Co. to CIL.
• CIL acquired 100 share of EH BV, a Netherland
  company.
• CIL sold the share of H Co. to EH BV for 23.

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Facts (contd)

• EH BV sold shares of H Co. to third party.
• Woods claimed that the capital gains is not
  chargeable to tax in UK.
• Department accepted that CIL is not a resident of
  UK, but argued that EH BV is a UK resident as its
  control and management
• is in UK and therefore capital gains are
  taxable in UK.

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Mr. and Mrs. woods
Settled various trusts (appointed BVI Ltd as
trustee for 10 trusts)
gifted 49 holding in H Co.
CIL (BVI Co.)
Sold its 49 holding in H Co.
100
EH BV (Netherland Co.)
Sold to third parties
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Issue

• Whether EH BV has its central control and
  management in UK, making it a resident of UK
  under the UK domestic tax law, thus making the
  capital gains taxable in UK.
• Whether the place of effective management is
  situated in UK for the purposes of A. 4(3) of the
  DTAA.

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Held

• That EH BV is a resident of Netherland in view of
  the fact that
• The directors of EH were not bypassed as their
  representatives signed the documents.
• The fact that the director accepted the agreement
  prepared by PWC is not surprising.
• No inference is possible that PWC dictated to
  director as to what decision to take.

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Held (contd.)

• Difference between influencing and dictating
  the decision of Board has been explained
• No decision given on the issue of place of
  effective management as that issue did not arise
  in view of the decision on the first issue.