I. Case Overview

Company C is incorporated in Jersey. Under UK law, a company is considered a UK tax resident if it is incorporated in the UK or if its central management and control are conducted from the UK. HM Revenue & Customs (HMRC) argued that Company C was managed and controlled from the UK, making it a UK tax resident. In contrast, Company C claimed that its management and control were conducted from Jersey, where its board of directors made all strategic decisions. This disagreement led to a lawsuit in the High Court.

II. Key Point of Dispute

The central issue was whether Company C’s management and control were carried out in the UK, which would make it a UK tax resident.

HMRC claimed that, despite Company C’s board of directors being based in Jersey, all significant decisions, particularly those related to finance and strategy, were effectively made by its parent company in the UK. Therefore, HMRC argued that Company C’s central management and control were actually exercised in the UK.

On the other hand, Company C argued that its board of directors had full authority to make independent decisions and that all board meetings and strategic decisions were conducted in Jersey. Based on this, Company C maintained that its management and control were based in Jersey, not in the UK, making it a non-UK tax resident.

III.Final Ruling

The High Court ruled in favor of Company C, concluding that Company C’s central management and control were indeed exercised in Jersey, not in the UK. The court’s decision was based on evidence that Company C’s board of directors in Jersey made all strategic decisions independently without interference from the UK parent company.

The court highlighted that the location where a company’s board of directors meets and makes key decisions is a critical factor in determining its tax residency. Since all significant decisions for Company C were made in Jersey, the court determined that Company C is not a UK tax resident.

IV. Insights for International Businesses

（A）Understand Tax Residency Rules in Each Jurisdiction

Companies involved in international operations need to understand the tax residency rules of the countries where they do business to ensure compliance and avoid disputes with tax authorities.

（B）Keep Detailed Records of Decision-Making Processes

It is important for companies to keep clear and detailed records of where and how decisions are made, including the location of board meetings and the independence of their directors. Such records can be crucial evidence in tax residency disputes.

（C）Regularly Review Governance Practices

Companies should regularly assess their governance practices to ensure they align with the tax residency rules of the jurisdictions in which they operate. This helps minimize the risk of disputes and ensures compliance.

（D）Seek Professional Advice for Complex Tax Matters

For complex tax issues like determining tax residency, companies should seek guidance from tax experts or legal professionals. Professional advice can help navigate tax laws and ensure that companies remain compliant with local regulations.