On 17 June 2016, the First-tier Tribunal (in Farnborough Airport Properties Ltd v HMRC2) held that the appointment of a receiver over a (would-be surrendering) group company meant that “arrangements” were in place for the company to no longer be under the same “control” as would-be claimant group companies. The group company in receivership was therefore unable to surrender group relief from the date the receiver was appointed.
It is perhaps not surprising, in this particular case, that the appointment of the receiver resulted in the receiver obtaining “control” of the company for section 1124 CTA 2010 purposes. Under the security documents the receivers were appointed as receivers over the whole of the company’s property, with wide powers “to do or omit to do anything which he considers appropriate in relation to the Secured Assets” and “to carry on the business of the Company”.
What is more surprising is the Tribunal’s view that the appointment triggered a change of control for section 154 CTA 2010 purposes. As argued by counsel for the appellants in this case, section 154 tends to be regarded as an anti-avoidance provision to be construed narrowly, despite the wide drafting. The Tribunal rejected this argument, holding that section 154 was widely drafted with a clear and simple purpose; to deny group relief as between companies not under common control.
The Tribunal did not examine the legal process of receivership in contrast to administration nor did it explore in detail (beyond the wording of the security documents) the measure of “control” given in this particular receivership.
It remains to be seen whether this decision will be appealed to the Upper Tribunal. In the meantime it should be assumed that HMRC will challenge claims for group relief involving a group member in receivership (where the receivership extends to more than just a single asset, or limited assets, of the company).
The decision can be viewed here.