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

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

2. 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.

3. 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.

4. 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

5. 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.

6. 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.

7. 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.