A property-owning group of companies has lost its appeal at the Court of Appeal (CoA) after similar defeats at the First-tier Tribunal and Upper Tribunal.

In summary, where a company controls another company and it is entitled to more than 75% of the dividends or assets on winding up, whether directly or indirectly, then those to companies may transfer tax losses from one company to another to ensure that the overall group position is the most advantageous.  Generally, to avoid the sale of losses, where “arrangements” are put in place to sell one of those companies then that company then falls out of the 75% group for group relief purposes.

In the case decided, receivers had been appointed to companies within a corporate group that for all other purposes would have met the requirements to enable group relief, the transfer of losses around the group.  There was no tax avoidance motive to the appointment of receivers, the appointment was granted under loan documents the companies had freely entered into.  The question at the CoA was whether the receivership represented a loss of control.

The CoA held that it did, the receivership meant the directors could no longer run the company for the benefit of the shareholders as the receivers were now running the company for the benefit of the creditors.  Director control had been superseded by receiver control.  The shareholders may still have been able to remove directors but any director appointed could not challenge the authority of the receivers.  The CoA further held that receivership was an “arrangement” and that the legislation applied to the detriment of the group of companies.

The decision can be found at: Farnborough Airport Properties Company & Anor v Revenue And Customs – Find case law (nationalarchives.gov.uk)

Group relief is an extremely valuable relief and advantage should be taken of it where it can.  This is a subject matter we are very experienced with.  Please do contact us if you have any questions.