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)

The Tribunal held that, in relation to the disposal of shares to the Dutch resident parent company (2014 Disposal), the UK legislation restricting no gain/no loss treatment to transferees within the UK tax net constitutes a restriction on the freedom of establishment under Article 49 TFEU. While the restriction may...

Source-derived case information.

Citation
[2019] UKFTT 207
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 (tax) Decision on Preliminary EU Law Issue
Outcome
Partly allowed
Legal Topics
Intra Group Transfers, Corporation Tax, Freedom of Establishment, Movement of Capital, Compatibility of UK Tax Law With EU Law, Deferral of Tax Liability
Tax Law European Union Law Corporate Law Intra Group Transfers Corporation Tax Freedom of Establishment Movement of Capital Compatibility of UK Tax Law With EU Law +1 more

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Parties

Gallaher Limited

Appellant

The Commissioners for Her Majesty's Revenue & Customs

Respondents

Procedural Posture

Corporation Tax Appeal / First Tier Tribunal (tax) Decision on Preliminary EU Law Issue

Legal Issues

  1. 1 Whether UK legislation restricting no gain/no loss treatment on intra-group disposals to UK tax net transferees is compatible with EU law
  2. 2 Whether immediate taxation on such disposals constitutes a restriction on EU freedoms
  3. 3 Whether such restriction can be justified by lack of objective comparability or balanced allocation of taxing powers

Ratio Decidendi

The Tribunal held that, in relation to the disposal of shares to the Dutch resident parent company (2014 Disposal), the UK legislation restricting no gain/no loss treatment to transferees within the UK tax net constitutes a restriction on the freedom of establishment under Article 49 TFEU. While the restriction may be justified by the need for a balanced allocation of taxing powers, the requirement for immediate payment of tax is disproportionate. The Tribunal therefore disapplied the restriction to the extent necessary to allow the appellant to defer payment of the tax. In relation to the disposal of intangible assets to the Swiss resident sister company (2011 Disposal), the Tribunal...

Court Disposition

Partly allowed

Orders

  • In relation to the 2014 Disposal, the restriction limiting no gain/no loss disposals to transferees within the UK tax net is disapplied; the appellant is entitled to defer payment of the tax.
  • In relation to the 2011 Disposal, the appeal is dismissed; UK legislation is compatible with EU law.