Development Securities – U.K. First-Tier Tribunal finds that a Jersey sub, whose Jersey board approved a decision contrary to the sub’s interests, resided in the U.K.
A U.K. tax avoidance scheme, which entailed Jersey subsidiaries (a majority of whose directors were Jersey residents who also served as directors of numerous other client companies) acquiring assets from their UK parent (DS Plc) or its U.K. subsidiaries at prices corresponding to the assets’ historical cost plus an inflation-indexation adjustment and then, after the Jersey-resident directors had resigned, selling those assets back to the DS group at their much lower fair market value, thereby triggering a tax loss that could be used in the DS group. The scheme depended on considering that these subs had their central management and control in Jersey at the time of the acquisitions. In finding that the subs instead were resident in the U.K., Morgan J stated:
Unlike Wood v Holden… this was not a case where the board considered a proposal and, having taken appropriate advice, decided that it was in the best interests of the companies to enter into it. Given that the transaction was clearly not in the interests of the companies and indeed could only take place with parental approval, the inescapable conclusion is that the board was simply doing what the parent, DS Plc, wanted it to do and in effect instructed it to do. In the circumstances, the line was crossed from the parent influencing and giving strategic or policy direction to the parent giving an instruction. The Jersey board were simply administering a decision they were instructed to undertake by DS Plc, in checking the legality of the plan and then administering the other consequent actions prior to handing over completely to the UK group.
Neal Armstrong. Summary of Development Securities (No. 9) Ltd & Ors v HMRC,  UKFTT 565 (TC) under s. 2(1).