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3.1. Corporate Tax Residence

A company is resident in the UK if it is incorporated in the UK or if the central management and control of its business is in the UK.  Section 14 of the Corporation Tax Act 2009 sets out that a company incorporated in the UK is resident in the UK for tax purposes.  The place of management and control test is only relevant to companies not incorporated in the UK and UK companies which qualify for the exemption rule, insofar as their place of incorporation is outside the UK.

The case law rule for determining residence is set out in De Beers Consolidated Mines Ltd v Howe, 5TC213 and Bullock v Unit Construction Co Ltd, 1959, 38TC712.  

In DeBeers, Lord Loreburn set out the rule for determining the residence of a company as follows:  “A company resides… where its real business is carried on… and the real business is carried on where the central management and control actually abides”.  De Beers had its main trading operations in South Africa, and was incorporated there.  As the controlling board of directors exercised its powers in the UK, the company was held to be resident in the UK.  

The rule was endorsed in Bullock v Unit Construction Co Ltd, where the constitution of the African subsidiary companies vested control in its board of directors which were required to hold its meetings outside the UK.  However, as the board of directors “were standing aside in all matters of real importance… affecting the central management and control”, and the Special Commissioners found that real control and management was exercised by the parent company’s board of directors in the UK, it was held to be resident in the UK.