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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Kellogg Brown & Root Holdings (UK) Ltd v HM Revenue and Customs  EWCA Civ 118 (24 February 2010)
Cite as:  STC 925,  EWCA Civ 118,  STI 558,  BTC 250,  Bus LR 957
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
The Rt Hon the Chancellor of the High Court
Royal Courts of Justice
Strand, London WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LADY JUSTICE SMITH
| KELLOGG BROWN & ROOT HOLDINGS (UK) LTD
|- and -
|THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTIOMS
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7404 1424
Official Shorthand Writers to the Court)
Mr Rupert Baldry (instructed by the Solicitor for HM Revenue and Customs) for the Respondents
Hearing date: 2 February 2010
Crown Copyright ©
Lord Neuberger MR:
A summary of the relevant facts
The relevant legislation
"(1) Subject to section 22(2), and subsection (2) below, where an asset is disposed of and acquired under a contract the time at which the disposal and acquisition is made is the time the contract is made (and not, if different, the time at which the asset is conveyed or transferred).
(2) If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied."
"(1) This section shall apply where a person acquires an asset and the person making the disposal is connected with him.
(2) Without prejudice to the generality of section 17(1) the person acquiring the asset and the person making the disposal shall be treated as parties to a transaction otherwise than by way of a bargain made at arm's length.
(3) Subject to subsection (4) below, if on the disposal a loss accrues to the person making the disposal, it shall not be deductible except from a chargeable gain accruing to him on some other disposal of an asset to the person acquiring the asset mentioned in subsection (1) above, being a disposal made at a time when they are connected persons."
"(1) Any question whether a person is connected with another shall for the purposes of this Act be determined in accordance with the following subsections of this section (any provision that one person is connected with another being taken to mean that they are connected with one another). ....
(5) A company is connected with another company-
(a) if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or
(b) if a group of 2 or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.
(6) A company is connected with another person, if that person has control of it or if that person and persons connected with him together have control of it.
(7) Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.
(8) In this section "relative" means brother, sister, ancestor or lineal descendant."
" ...(2) For the purposes of this Part, a person shall be taken to have control of a company if he exercises, or is able to exercise or is entitled to acquire, direct or indirect control over the company's affairs, and in particular, but without prejudice to the generality of the preceding words, if he possesses or is entitled to acquire -
(a) the greater part of the share capital or issued share capital of the company or of the voting power in the company; or
(b) such part of the issued share capital of the company as would, if the whole of the income of the company were in fact distributed among the participators (without regard to any rights which he or any other person has as a loan creditor), entitle him to receive the greater part of the amount so distributed; or
(c) such rights as would, in the event of the winding-up of the company or in any other circumstances, entitle him to receive the greater part of the assets of the company which would then be available for distribution among the participators.
(3) Where two or more persons together satisfy any of the conditions of subsection (2) above, they shall be taken to have control of the company.
(4) For the purposes of subsection (2) above a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date, or will at a future date be entitled to acquire.
(5) For the purposes of subsections (2) and (3) above, there shall be attributed to any person any rights or powers of a nominee for him, that is to say, any rights or powers which another person possesses on his behalf or may be required to exercise on his direction or behalf.
(6) For the purposes of subsections (2) and (3) above, there may also be attributed to any person all the rights and powers of any company of which he has, or he and associates of his have, control or any two or more such companies, or of any associate of his or of any two or more associates of his, including those attributed to a company or associate under subsection (5) above, but not those attributed to an associate under this subsection; and such attributions shall be made under this subsection as will result in the company being treated as under the control of five or fewer participators if it can be so treated . "
Summary of the arguments and issues
HMRC's cross-appeal: the time of the Disposal and section 28 of the 1992 Act
HHL's appeal: control and section 416 of the 1988 Act
HHL's appeal: section 286(5)(b) of the 1992 Act and "a group"
Lord Justice Longmore:
Lady Justice Smith: