Google parent company Alphabet launches cyber security company

Google’s parent company Alphabet says it is launching a cyber security company using technology created in its research and development arm called X.

Google parent company Alphabet launches cyber security company

Chronicle will try to give organisations a much clearer view of their security situation by combining Google’s strengths in machine learning with large amounts of computing power and storage. The new company will be one of the subsidiaries called “Other Bets” alongside businesses including its self-driving cars unit Waymo and life sciences division Verily.

Alphabet is entering a fragmented cyber security industry. The largest standalone security companies such as Symantec and McAfee have been challenged by a new generation of start-ups promising more sophisticated technologies than anti-virus software, and larger technology companies such as Cisco investing in the area.

Despite the myriad of new solutions, cyber attacks continue to increase and companies struggle to protect themselves from hackers. Hackers aren’t invisible; they leave tiny clues like a virus or bacteria in the bloodstream while they quietly harm the host Astro Teller, ‘captain of moonshots’ at Alphabet’s X Alphabet styles Google X as its “moonshot factory”.

Astro Teller, its ‘captain of moonshots’, said people must look at cyber security challenges from new angles. Writing in a blog post, he said the digital world needs an “immune system”. “Most organisations currently have to work like doctors treating a disease after the symptoms have shown up and the damage has been done,” he wrote.

“But hackers aren’t invisible; they leave tiny clues like a virus or bacteria in the bloodstream while they quietly harm the host.”

Chronicle aims to help companies adapt to the hackers while they are still active, just as bodies build antibodies to identify and reject harmful things. It will be led by Stephen Gillett, who joined X from Google Ventures, the company’s venture capital arm, and was previously chief operating officer of Symantec, one of the world’s largest cyber security companies.

French social security decree impacts yachting community – by Emma Batchelder

French social security decree impacts yachting community. Posted on Jan 22, 2018 by Emma Batchelder in Crew News – (click here for original article)

By Emma Batchelder

Members of the yachting community have gained some clarification on French social security tax responsibilities. Although the decree was suspended, it is possible that crew members may still be liable to pay taxes for now, particularly crew members who reside and work in France. Crew may wish to seek legal advice for their specific scenario.

Seafarers and nonresident employers of seafarers who spend more than 90 consecutive days in France or French waters are required to make contributions to ENIM, the French mariners’ social security agency, since the passing of a decree in March 2017. This has had a major impact on tourism and the yachting industries, but relief seems imminent with the laws potentially being overturned in early 2018. As of Sept. 13, the decree was suspended by the prime minister of France following reports of drastic 40-50 percent drops in revenue during tourist season.

Paying taxes is enough to give anyone a headache, let alone yacht crew, who have likely joined the world of yachting from a foreign country. Earning a salary in one currency, while living and traveling the world, and acquiring global investments along the way – it’s likely that heads are spinning. For many of these yacht crew, a lot of time is spent in the south of France, namely Antibes, the yachting hub of the Mediterranean.

French social security decree impacts yachting community.

On March 11, 2017, at a meeting in France, a decree was added and published in the Official Journal of the French Republic. Decree No. 2017-307 sets out obligations for both yacht owners and yacht crew in respect of MLC 2006. Affected seafarers who spend a 90-day-plus rolling period in France or French waters should be paying social security taxes. Leaving France or French waters would reset the count.

Foreign employers were directed to an ENIM agent registered and based in France. The agent acts on the behalf of the employer and obtains all necessary information regarding the crew list: their positions, salary and the cruising itinerary. ENIM receives this information and calculate everyone’s fee. It is likely that the employer will be asked to pay a security deposit equal to six months of employer and employee contributions.

An example of the contribution costs was shared from ENIM:

As a captain on a pleasure craft of 200 feet in international navigation for 30 days: wage contributions of €422 and employer costs of €1,245
Seaman on a pleasure craft of 200 feet in international navigation for 30 days: wage contributions of €208 and employer costs of €614

Please note these numbers are directly from the French authorities, and without declaring the rate of pay, have limited value. But, these costs are significant, and the decree was disputed by many industry professionals.

Seafarers already contributing social security to an official agency of another country that is an EU or EEA member state, or any state that has a bilateral social security treaty – such as the United States and Canada – are exempt from contributing. However, you must be making social security payments in those territories; simply carrying a passport is not sufficient to be exempted. Our Australian and New Zealand colleagues should note that there is no bilateral treaty for those countries, therefore exemption does not apply. The contribution amounts due are identical to those paid by, and on behalf of, French seafarers (7.5 percent on earned income), and carry a 0.5 percent-per-day interest rate on late payment.

Benefits of this plan are meant to be:

ENIM will provide the seafarer with health/medical care and retirement benefits.
After 25 years of contributed service, and at a minimum age of 50, ENIM will provide a full retirement pension. The pensionable age will be 55 years if the seafarer has completed less than 25 years of service.
After 15 years of contributed service, seafarers will qualify for a pro-rata retirement pension, however, this will only apply after the seafarer has reached age 55.
In the event of a seafarer’s death, there are provisions in place to pay retirement benefits to certain family members.

How this new law currently impacts yacht owners is:

Nonresident employers of yacht crew who are required to make social security contributions in France will need to show proof of a “bond of guarantee” from a bank. Failure to do so will result in payment in the form of a “security deposit” payable to ENIM.
Appointing a French-based agent to make payments and act on behalf of the employer may be desired.
Payment is required to be received by the 25th day of each month.
For each day of late payment, a penalty of 0.5 percent of contributions will be owed.
Failure to pay the contributions could constitute a criminal offense, or eventually lead to the yacht’s arrest.

In conclusion, the changes being made to tax situations for seafarers are even more reason to keep good track of all travel that you undertake, and any money that you earn:

Keep vessel logbooks up to date.
Be consistent with keeping your seaman’s discharge book up to date.
Do not throw away any expired passports.
Keep a travel diary as your log book. Audits can take place several years after a tax year has ended and you may need to support your claim with the necessary documentation.
If necessary, have your employer give you an official affidavit.

As a seafarer, knowing who to pay taxes to has been a rather gray area for quite some time. Yacht crew spend significant amounts of time in multiple countries every year, and generally make very desirable salaries. Knowing whether you are following the laws and abiding by the rules can be daunting, which is why it is important to stay up to date with any changes.

If you answer yes to any of these questions, you may have social security or tax withholdings obligations:
Do you employ any U.S. or French citizens?
Are you or the vessel in the U.S. or U.S. waters for more than 183 days in a 365-day year?
Are you or the vessel in France or French waters for more than 90 consecutive days?
Are you or the vessel in France or French waters for more than 183 days in a calendar year?

France will not be the only country who tries to claim taxes on seafarers’ earnings. While this first attempt has been poorly executed, we anticipate other countries will make similar attempts in the future.

This article is for information purposes only. The information and opinion expressed in this document does not constitute legal advice and should not be regarded as a substitute for legal advice.

Former chief stewardess Emma Batchelder is PR manager at Luxury Yacht Group in Fort Lauderdale. For more information, visit

Malta: Residence Programme Rules

Malta: Residence Programme Rules
Last Updated: 5 January 2018
Article by Simon Xuereb – KPMG Malta

Malta is becoming an increasingly popular destination for many foreigners looking to relocate. The small island boasts a stable economy, sublime climate, as well as numerous leisure and cultural attractions. English is widely spoken which facilitates settling in and overcomes language barriers. A 2016 survey conducted by the Expat Insider ranks the Maltese islands as the second–best place in the world for foreigners to live globally, and as the top destination in Europe.
The Programme

The Residence Programme Rules (RPR) enacted by the Maltese Government allows beneficiaries and their qualifying dependents to qualify for a special tax rate subject to fulfilling certain criteria, whereby the beneficiary:

Is either a national from an EU Member State, the European Economic Area (EEA), or Switzerland;
Is neither a Maltese national nor a permanent resident of Malta;
Holds a qualifying property by way of purchase at a minimum value of €220,000 or by way of lease at a minimum rent of €8,750 per annum for properties in Gozo or the South of Malta (per a predefined list of qualifying areas). For properties purchased anywhere else, the minimum property value is €275,000 or minimum rent of €9,600 per annum for leaseholds. Notes: the property cannot be sublet, only the beneficiary and their dependents per the Programme may reside in the property.
Is not a beneficiary in terms of any other special tax status;
Pays an annual minimum tax of at least €15,000 upon income arising outside of Malta which is received in/ remitted
to Malta;
Possesses adequate economic resources to maintain themselves and their dependents;
Holds a comprehensive health insurance covering themselves and all dependents for all risks across the whole of the EU;
Can effectively communicate in one of Malta’s official languages (Maltese or English);
Is of good character.

Tax Implications

Malta’s remittance basis of taxation means non-domiciled individuals are only subject to Maltese tax on income arising outside of Malta to the extent that it is received in Malta. The status grants the beneficiaries and their qualifying dependents a flat 15% Malta tax rate on any such income which is remitted to / received in Malta, subject to the payment of the minimum tax mentioned above (payable in full in both the year when the tax status is received and the year when it ceases to apply, as well as each full tax year for which the status applies). Any chargeable income and gains arising in Malta would generally be taxable at a flat 35% rate of tax. Finally, any capital gains arising outside of Malta, would not be subject to Maltese tax.
Other considerations

Where the beneficiary applies for or becomes a permanent resident of Malta, s/he is no longer eligible to benefit from the special tax status and becomes taxable on all income and gains on a worldwide basis, whether accrued in or remitted to Malta as set out in the Income Tax Act.
Only the beneficiary and their dependents are entitled to reside in the qualifying property; household staff (subject to various conditions) may also be permitted to reside with the beneficiary, however, they would not be entitled to benefit from the same benefits and tax rates granted under the Programme.

Tax Residence Certificate

A Tax Residence Certificate (‘TRC’) may be issued by the Maltese Inland Revenue Department, however issuance of such is subject to the beneficiary satisfying to the Maltese Inland Revenue that s/he is a tax resident of Malta in terms of Maltese domestic law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


Boschendal Wine Estate – bucks the drought trend

The Western Cape has faced its worst drought in a century, and this is the third consecutive year of that drought. Cape Town’s mayor has been at pains to point out that — with climate change — “This is the new normal.”

With dwindling water supply to farmers, crop productions have been slashed and, across the Province, between 35,000 and 50,000 jobs are at risk, excluding an even larger number of seasonal workers. I asked for the provincial department of agriculture’s stats for produce under threat but received no response! I am underwhelmed!

Minister Alan Winde’s speeches, however, paint a dire picture which are just a tip of the iceberg. A month ago, Alan visited the West Coast. “There’s thousands and thousands of hectares of agricultural land below the Clanwilliam Dam which produces a lot of produce and revenue for our country that’s now under severe water restrictions. They’re going to produce 50% less,” he said. “Farmers are being throttled and are forced to use 60% less water, with the Clanwilliam Dam level at around 36%. There’s an 80% decrease in potato crops and a drop in wine and export quality citrus.” With commercial farmers struggling, one focus for Province is supporting backyard food gardens for workers’ food security.

“In places like Ceres, 80% less potatoes and 50% less onions will be planted resulting in about R40 million less paid out in salaries and wages. In Lutzville the tomato paste plant will not even open this year. Some 30 000 animals have been sold as farmers battled to feed their core herds.”

Against this backdrop, Boschendal started out at the beginning of the drought with a massive planting of 600,000 new fruit trees over a period of three years — which has just been completed. Permanent jobs in farming operations alone has grown from 70 to 287. Their dams are full and Jacques du Toit, Boschendal’s general manager, said the dams started overflowing on 20 August and he counted 15 streams on the farm running into the Dwars River, on to the Berg River, and out to sea…

A rare sight for Capetonians who have become accustomed to seeing photographs of parched dams: York Dam on the slopes of Drakenstein mountain looking across to Simonsberg mountain. The photographs of the dams were taken on 30 November 2017.

Normandie Dam is alongside York Dam.

Rhodes Dam on the slopes of Simonsberg mountain.
Upper Vineyards Dam

Mountain Vineyards Dam on the slopes of Simonsberg mountain.
Rachelfontein Dam

Rachelfontein Dam, the overflow dam for Mountain Vineyards Dam, with the Matroosberg mountain above Worcester just peaking through in the distance.
Cleaning dams

At the end of last summer, the dams were cleaned and silt removed. Farmers may not increase the size of their dams. (Crazy, huh?) At York dam, they found underwater mountains of rubble that had never been removed from the dam when it was constructed.

Boschendal dams (and just some of them are shown above) hold 3½ million cubic metres of water — 3,500 megalitres. Boschendal relies entirely on its own dams for all agricultural water. It doesn’t draw any water from the Theewaterskloof, Berg River or any State dams for farming operations.

Filling the dams and making the water last is achieved by careful and effective custodianship and management of the land — alien clearing does make a very big difference to water flows from the mountains and nurturing soil quality in the vineyards and orchards sees water use reduced by 30%. Jacques du Toit keeps repeating: “Soil health is everything.”

Jacques and former CEO, Rob Lundie, spent hours discussing and debating innovations to improve the management of the land. Rob encouraged all managers to research and innovate — and YouTube is full of inspiration for farmers. They trialled new orchard blocks where cover crops were planted before and after the new trees were planted. Planting cover crops after the new trees were established won. The cover crops are a mix of rye grass, turnips, ciradella, radishes, vetch and red & white clover Boschendal’s Black Angus beef herd grazes on the cover crops… leaving their own goodness behind.

Apart from reducing water usage, the good soil quality also reduces the need for fertilizers by 30%. Using biological fertilizers, although more expensive, is also better for the soil.

Jacques started soil tests at Rob’s insistence and the orchards gave a reading of only 2. He went up to the Viewpoint to fetch some topsoil for comparison. “One needs a non-disturbed reference as yardstick. It was rich and full of earthworms,” he recalls. “The reading from that soil was 21! Better than good.” In the following six months, he managed to improve soil quality in the orchards by 400-600%.”

“Healthy soil holds rain water — the statistics show that 300,000-500,000 litres of water per hectare per 1% increase in humus is saved. You need less irrigation and the land seeps for longer, amongst many other benefits,” says Rob.
Computer screen in the office showing the status of the probes measuring moisture.

Computer screen in the office showing the status of the probes measuring moisture.

Boschendal is micro-managed. There are 300 precision probes in the soil measuring moisture every 10cm to a depth of 80cm — one per hectare in the orchards and one every three hectares in the vineyards — with repeaters to the office.

There is an irony to the “bad” alien vegetation… it is being recycled to improve the quality of the soil in the orchards. It all goes into a chipper — at a rate of 50m³ a day — and 200m³ of wood chips/hectare goes into the topsoil on the orchards. It’s going to take another two years of chipping before there will be enough for the whole farm. Distributing the wood chips was a time-consuming process so Jacques designed a machine to do it more efficiently.

Some of the alien vegetation is used to create biochar, which is added to the farm’s composting operation, using waste from the restaurants and winery. The worm farm on the Estate has become a dedicated operation.

The beef herd, which peaked at nearly 800 cows, has been reduced to 600 — the number best suited to the farm. Farmer Rico’s pasture-raised chickens also fall under Jacques’ ambit now and will soon have 4000 lay hens and 2000 broilers. But it’s the pigs that must be the envy of pigs everywhere! There are three forested camps each of about 2½ hectares in forests where they roam free.
Boschendal’s new solar farm

With Eskom’s future looking increasingly bleak and electricity price hikes almost assured, Boschendal’s massive second solar farm producing almost 1 megawatt of electricity has just been commissioned, reducing the farm’s reliance on the national grid.
Stellenbosch dam above Ida’s Valley, with Simonsberg behind

Stellenbosch dam above Ida’s Valley, with Simonsberg behind, was 97% full last week.

What are the lessons from Boschendal? The most important is that preparation for the drought should have started over three years ago.

The Stellenbosch dam above Ida’s Valley on the other side of Simonsberg was also full and stood at 97% last week, This has less to do with Stellenbosch municipality and everything to do with the farmers of the Greater Simonsberg Conservancy — who cleared alien vegetation in the catchment area and watercourses above the dam. Take a bow Tokara and Thelema Estates, for over five years they have continuously cleaned up all alien vegetation.

Cape Town’s mayor is correct when she says “this is the new normal”. But the City has been preaching Climate Change for nearly 20 years… so why wasn’t it prepared? Why is the City building temporary desalination plants if this is the new normal?

The mayor recently added alien clearing around Wemmershoek dam to her list of interventions — that’s going to have no impact in the short term because the rains are long past. Had they started five years ago, clearing alien vegetation in the catchment areas of all Cape Town dams, an expert speaking on CapeTalk radio said the impact would have been the equivalent of building a new full Wemmershoek dam.

The City has failed its citizens, and national government… well… they have neither the competence, the political will nor the funding to make a difference. The national Department of Water & Sanitation is bankrupt.

Politicians are playing Russian Roulette with the Province’s future. They focus on politically-expedient decisions rather than long term plans. I asked one politician what will happen if the drought… the new normal… doesn’t break next winter. “We’ll all resign,” was the answer. Now that’s cold comfort! Maybe a few really good farmers would do a better job of running the City and Province.


UK Government’s vision for a greener future launched

The UK government has published – here – its 25 Year Environment Plan, today, 11 January 2018. From – Department for Environment, Food & Rural Affairs, Prime Minister’s Office, 10 Downing Street, and The Rt Hon Michael Gove MP

A pledge to eliminate avoidable waste, introduce new safeguards for wildlife and connect more children with nature are among the ambitious plans for a greener future outlined by Prime Minister Theresa May and Environment Secretary Michael Gove today.

In a major speech today, the Prime Minister has launched the government’s landmark 25 Year Environment Plan, setting out how we will improve the environment over a generation by creating richer habitats for wildlife, improving air and water quality and curbing the scourge of plastic in the world’s oceans.

“A Green Future: Our 25 Year Plan to Improve the Environment” sets out how over the next quarter of a century the government will:

Crackdown on plastics by eliminating all avoidable plastic waste through extending the 5p plastic bag charge to small retailers, removing consumer single use plastics from the government estate, supporting the water industry to significantly increase water fountains and working with retailers on introducing plastic-free supermarket aisles.

Help wildlife thrive by creating 500,000 hectares of new habitat for endangered species, supporting farmers to turn fields into meadows and other habitats, replenishing depleted soils and providing £5.7 million to kick-start a new Northern Forest.

Be a world leader in environmental protection by investigating the feasibility of an anti-poaching taskforce to tackle the illegal wildlife trade, committing overseas aid to help developing nations combat plastic waste, and extending the UK’s network of marine protected areas

Deliver a Green Brexit by consulting on a new environmental watchdog to hold government to account for environmental standards, and setting out a new approach to agriculture and fisheries management

Seek to embed a ‘net environmental gain’ principle so development delivers environmental improvements locally and nationally, enabling housing development without increasing overall burdens on developers

Connect people with nature by creating ‘nature friendly schools’ and reviewing National Parks to see how they can improve and whether the network should be extended.

Environment Secretary Michael Gove said:

Respecting nature’s intrinsic value and making sure we are wise stewards of our natural world is critical if we are to leave the environment in a better state than we inherited it.

Our Environment Plan sets out how over the next 25 years we will radically reduce the waste that is choking oceans and rivers, cleanse our air of toxic pollutants and create new habitats for our most precious wildlife to thrive.

Through this plan we will build on our reputation as a global leader in environmental protection, creating an environment everyone can enjoy and helping the next generation flourish.

In a world-first, the 25 Year Environment Plan also sets out how we will use a natural capital approach to help us see the additional benefits – whether that is improved health and wellbeing, or national prosperity – in every part our environment, helping improve and direct decision making, and guiding new development.

The Plan sits alongside existing work. A Call for Evidence on reward and return schemes for drinks containers, including plastic bottles, has closed. Its findings are now being assessed by the Working Group, who will make recommendations to ministers this Spring.

As announced in the Budget, the Government will also launch a further Call for Evidence shortly on how changes to the tax system or charges on single-use plastics can play a role in reducing waste.

The plan sits alongside the Government’s Clean Growth Strategy, which sets out how the UK is leading the world in cutting carbon emissions to combat climate change and driving economic growth.

The tide continues to turn for group companies offshore to the UK

The tide continues to turn for group companies offshore to the UK

The case of Development Securities (No. 9) Ltd and other v HMRC [2017] UKFTT 0565 is the latest in a line of cases concerning the UK corporate tax residence of offshore companies. The case once again highlights the difficulties in preserving an offshore company’s non-UK tax resident status, whilst giving a useful insight into the factors and evidence that HRMC will examine when considering whether the decisions of an offshore company are, in fact, being taken from the UK.


Companies that are UK tax resident are subject to UK corporation tax on their worldwide profits, regardless of where they arise. A company will be UK tax resident if it is incorporated in the UK or if it is centrally managed and controlled from the UK. This latter test evolved from a line of cases on corporate residence spanning the past 100 years, starting with De Beers Consolidated Mines v Howe [1906] AC 445. In De Beers, it was held that a company is resident ‘where its real business is carried on…and its real business is carried on where its central management and control actually abides’. De Beers and subsequent cases made it clear that where central management and control resides is a question of fact in each case. For example, in Unit Construction Co Ltd v Bullock [1960] 38 TC 712, a South African company’s articles of association made it unconstitutional for any company decisions to be taken from the UK. The reality, however, was that all decisions were being taken by the parent company in the UK, and the provisions in the subsidiary’s articles were not sufficient to prevent the company from becoming UK tax resident under the central management and control test.

HMRC’s Statement of Practice 1/90 sets out HMRC’s view on assessing central management and control. Broadly speaking, they will look to the highest level of control, which will typically be the board of directors (though it is possible for control to rest in the hands of a single person) and determine where decisions are taken. If the directors are not responsible for decision-making, HMRC will seek to establish who does exercise central management and control, and where. Furthermore, HMRC has stated that it will examine closely cases where a ‘major objective’ of the underlying arrangement is to obtain tax benefits, and there is an attempt to create the appearance of central management and control without the reality. Therefore, in such cases, HMRC will look to substance of the arrangements rather than mere form.

Where an outside party is found to be influencing the board, HMRC will assess the level of influence to determine whether the board is truly in control. The case of Wood v Holden [2006] STC 443 made the distinction between a person involved in “proposing, advising and influencing” the decisions of the company and a person “who dictates the decisions which are to be taken”. Where it is found that the latter exists, the board will have been usurped and the central management and control of the company will be wherever that person is resident.


In Development Securities, tax advisers for a UK plc (a property development group) devised a plan to use certain latent capital losses on assets held within the group to reduce the tax on the potential capital gains that the group anticipated it would make in that accounting period. The plan involved selling assets to newly incorporated Jersey subsidiaries for a price in excess of their market value. Directors of the subsidiaries would be Jersey-based, and all board meetings would take place in Jersey. No tax charge would arise on the disposal of the assets for the UK plc, and the UK plc would fund the purchase by way of capital contribution/subscription for shares. Later, the Jersey subsidiaries would become UK tax resident, with the assets standing at a larger loss, thereby providing an intended saving of approximately £8 million.

Under Jersey law, the decision for the subsidiaries to enter into the transaction required shareholder approval i.e. approval from the UK plc, which the tax advisers appreciated could give rise to UK central management and control issues. The advisers were confident that HMRC would “almost certainly” enquire into the returns of the companies involved with the plan, so the implementation was executed “meticulously” in an attempt to avoid any suggestions that central management and control had left Jersey.

Despite the careful execution of the plan, HMRC did make the forewarned enquiries, ultimately assessing the Jersey subsidiaries as being centrally managed and controlled from the UK. The UK plc appealed to the first-tier tax tribunal.

The tribunal concluded that central management and control was located in the UK, and as such, the Jersey subsidiaries were UK resident companies. In its 127 page decision, the tribunal focused on the following “unusual” features:

The acquisition of the assets at an overvalue by the Jersey subsidiaries was inherently uncommercial; the Jersey directors produced no evidence that they had considered the merits of entering into the agreements to acquire the assets from the UK plc;
The strategic decisions of the Jersey companies i.e. to acquire the assets and then move the control of the Jersey companies back to the UK, were taken in the UK. The tribunal found that these decisions were decided by the UK plc immediately before the incorporation of the Jersey companies; and
The Jersey directors were following the UK parent’s instructions, which meant the UK plc was doing far more than “proposing, advising and influencing” the decision. The tribunal held that the Jersey directors were “simply administering a decision they were instructed to undertake”. In making this assessment, the tribunal conducted a thorough examination of the contemporaneous documents and correspondence detailing the transactions, and scrutinised the differences between the final board minutes and the handwritten notes of an employee present at the board meetings. It held that the language used in the notes suggested that it was inevitable that the plan was to be implemented by the subsidiaries, with the directors failing to apply their minds to the commerciality and merits of the decision to implement the plan.

The real business of the subsidiaries was therefore not property investment, but of implementing the plan formulated by the UK plc for the purposes of maximising tax losses.

Although the tribunal confirmed the continued relevance of the De Beers test i.e. that a company is resident where its central management and control abides, it extended the test so that where central management and control abides is determined on a “scrutiny of the course of the business… informed by what had taken place immediately prior to incorporation” i.e. the tax planning arrangements of the UK plc. This aspect of the test has not featured in previous cases on corporate residence, yet featured heavily in the tribunal’s decision in agreeing with HMRC. Commentators have been quick to point this out as the basis of a potential appeal.


Whilst we anticipate an appeal, Development Securities sets out a number of important points for taxpayers and advisers which should be considered when seeking to mitigate the risk of a future residence challenge from HMRC. Of course, it is not uncommon for a subsidiary to receive guidance from its parent in making commercial decisions, and the fact a subsidiary does so should not mean that the subsidiary has relinquished its autonomy in making decisions. In these situations, it is more important than ever that all strategic and commercial decisions of the subsidiary are properly considered by the board, including an assessment of merits and benefits for the company and/or the wider group. Accurate contemporaneous board minutes must be produced to evidence these considerations (especially if there is a risk that the decision could disadvantage the company). Finally, it seems that HMRC will now examine the entire course of a business when assessing where central management and control resides, including periods prior to the company’s incorporation. This may be problematic for offshore companies set up for one-off purposes, though it is unlikely to be an issue for offshore companies established to serve a single, yet long-term, function for a group.

In an environment which is seeing increasing numbers of challenges from HMRC on tax residence, groups with offshore entities keen to preserve their non-UK resident status should be encouraged to review their current arrangements in light of the points raised in Development Securities.

The article first appeared in our Real Estate Bulletin – Janaury 2018.