On 4 October 2017, the Upper Tribunal held3 that from the date of appointment of receivers over a (would-be surrendering) group company, it was no longer grouped with a would-be claimant company for corporation tax group relief purposes.
Our earlier commentary on the First-tier Tribunal decision in this case can be viewed here.
At issue before the Tribunal was:
• whether the shareholders of the group’s ultimate parent company ceased to have “control”4 of the group company once the receivers were appointed?
• whether the appointment of receivers is an “arrangement”5 that could potentially de-group the companies?
The Upper Tribunal held that, despite the fact that the receivers’ powers were extensive, the receivers did not “control” the company, as the document pursuant to which they were appointed (the debenture) was not a constitutional document akin to articles of associated (as required by section 1124 CTA 2010). However, upon the receivers’ appointment, the ultimate parent shareholders lost “control” of the group company as they could no longer secure that the company’s affairs were conducted in accordance with their wishes. It was, in the Tribunal’s view, irrelevant that by this reasoning no-one exercised “control” of the company once the receivers were appointed.
On the “arrangements” issue, the Tribunal held that this had a wide meaning and would encompass both the appointment of receivers and entry into the debenture. Only upon appointment however did it become the case that the would-be claimant company was controlled by persons who no longer had control of the would-be surrendering company (thereby denying group relief).
The decision can be viewed here.