Gallaher Ltd v Revenue & Customs (INCOME TAX/CORPORATION TAX : European law) [2019] UKFTT 207 (TC) (25 March 2019)

Gallaher Ltd v Revenue & Customs (INCOME TAX/CORPORATION TAX : European law) [2019] UKFTT 207 (TC) (25 March 2019)

In relation to the disposal of shares to the Dutch resident parent company (2014 Disposal), the restriction limiting no gain/no loss disposals to transferees within the UK tax net is disproportionate and must be disapplied to the extent necessary to allow deferral of corporation tax liability. In relation to the disposal of intangible assets to the Swiss resident sister company (2011 Disposal), the UK legislation is compatible with EU law and no disapplication is required.

Citation
[2019] UKFTT 207 (TC)
Parties
Appellant: Gallaher Limited; Respondents: The Commissioners for Her Majesty's Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
25 March 2019
Procedural Posture
Corporation Tax Appeal / First Tier Tribunal Decision
Outcome
Appeal allowed in part
Legal Topics
Intra Group Disposals, Freedom of Establishment, Freedom of Movement of Capital, Conforming Interpretation, Disapplication of Domestic Law, Balanced Allocation of Taxing Powers
Tax Law European Union Law Intra Group Disposals Freedom of Establishment Freedom of Movement of Capital Conforming Interpretation Disapplication of Domestic Law Balanced Allocation of Taxing Powers

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 3 Authorities cited 17 Party arguments 2 Amounts and remedies 3
Sign in to unlock

Parties

Gallaher Limited

Appellant

The Commissioners for Her Majesty's Revenue & Customs

Respondents

Procedural Posture

Corporation Tax Appeal / First Tier Tribunal Decision

Legal Issues

  1. 1 Whether UK intra-group disposal tax rules are compliant with EU law
  2. 2 Whether immediate corporation tax liability on cross-border intra-group disposals restricts EU freedoms
  3. 3 Whether such restriction can be justified by lack of objective comparability or balanced allocation of taxing powers

Ratio Decidendi

In relation to the disposal of shares to the Dutch resident parent company (2014 Disposal), the restriction limiting no gain/no loss disposals to transferees within the UK tax net is disproportionate and must be disapplied to the extent necessary to allow deferral of corporation tax liability. In relation to the disposal of intangible assets to the Swiss resident sister company (2011 Disposal), the UK legislation is compatible with EU law and no disapplication is required.

Court Disposition

Appeal allowed in part

Orders

  • Disapplication of restriction in UK legislation for 2014 Disposal to permit deferral of corporation tax liability
  • No relief for 2011 Disposal; UK legislation upheld as compatible with EU law