"(1) This section has effect for the interpretation of sections 171 to 181 except in so far as the context otherwise requires... (2) Except as otherwise provided— (a) ... (b) subsections (3) to (6) below apply to determine whether companies form a group and, where they do, which is the principal company of the group; (c) ... (d) "group" and "subsidiary" shall be construed with any necessary modifications where applied to a company incorporated under the law of a country outside the United Kingdom. (3) Subject to subsections (4) to (6) below— (a) a company (referred to below and in sections 171 to 181 as the "principal company of the group") and all its 75 per cent subsidiaries form a group and, if any of those subsidiaries have 75 per cent subsidiaries, the group includes them and their 75 per cent subsidiaries, and so on, but (b) a group does not include any company (other than the principal company of the group) that is not an effective 51 per cent subsidiary of the principal company of the group. (4) A company cannot be the principal company of a group if it is itself a 75 per cent subsidiary of another company. ... (7) For the purposes of this section and sections 171 to 181, a company ("the subsidiary") is an effective 51 per cent subsidiary of another company ("the parent") at any time if and only if— (a) the parent is beneficially entitled to more than 50 per cent of any profits available for distribution to equity holders of the subsidiary; and (b) the parent would be beneficially entitled to more than 50 per cent of any assets of the subsidiary available for distribution to its equity holders on a winding-up…"
"(1) Subsections (2) to (4) define, for the purposes of the Corporation Tax Acts, the circumstances in which a body corporate ("
"(1) Where— (a) a company ("company A") disposes of an asset to another company ("company B") at a time when both companies are members of the same group, and (b) the conditions in subsection (1A) below are met, company A and company B are treated for the purposes of corporation tax on chargeable gains as if the asset were acquired by company B for a consideration of such amount as would secure that neither a gain nor a loss would accrue to company A on the disposal. (1A) The conditions referred to in subsection (1)(b) above are— (a) that company A is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately before that time, and (b) that company B is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately after that time. For this purpose an asset is a "chargeable asset" in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes. ..."
"764 Meaning of "company", "group" and "subsidiary" (1) This Chapter applies for the purposes of this Part to determine whether companies form a group and, where they do, which is the principal company of the group. ...
"775 Transfers within a group (1) A transfer of an intangible fixed asset from one company ("the transferor") to another company ("the transferee") is tax-neutral for the purposes of this Part if— (a) at the time of the transfer both companies are members of the same group, (b) immediately before the transfer the asset is a chargeable intangible asset in relation to the transferor, and (c) immediately after the transfer the asset is a chargeable intangible asset in relation to the transferee. (2) For the consequences of a transfer being tax-neutral for the purposes of this Part, see section 776. ..."
"776 Meaning of "tax-neutral" transfer (1) This section sets out the consequences of a transfer of an asset being "tax-neutral" for the purposes of this Part. (2) The transfer is treated for those purposes as not involving— (a) any realisation of the asset by the transferor, or (b) any acquisition of the asset by the transferee. (3) The transferee is treated for those purposes— (a) as having held the asset at all times when it was held by the transferor, and (b) as having done all such things in relation to the asset as were done by the transferor. (4) In particular— (a) the original cost of the asset in the hands of the transferor is treated as the original cost in the hands of the transferee, and (b) all such credits and debits in relation to the asset as have been brought into account for tax purposes by the transferor under this Part are treated as if they had been brought into account by the transferee. (5) The references in subsection (4)(a) to the cost of the asset are to the cost recognised for tax purposes."
"741 Meaning of "chargeable intangible asset" and "chargeable realisation gain" (1) For the purposes of this Part, an asset is a "chargeable intangible asset" in relation to a company at any time if any gain on its realisation by the company at that time would be a chargeable realisation gain. (2) For the purposes of this Part, "chargeable realisation gain", in relation to an asset, means a gain on the realisation of the asset that gives rise to a credit required to be brought into account under this Chapter. ... (4) For the purpose of subsections (1) and (2), ignore any question whether— (a)... (b) a transfer of an asset is tax-neutral for the purposes of this Part (see section 776)."
" (1) All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression "enforceable EU right" and similar expressions shall be read as referring to one to which this subsection applies."
" Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital."
" Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States. "
"Article 63 1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. 2. Within the framework of the provisions set out in this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited. Article 64 1. The provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets. ... Article 65 1. The provisions of Article 63 shall be without prejudice to the right of Member States: a. to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested; .... 2… 3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63."
" In this Nomenclature, capital movements are classified according to the economic nature of the assets and liabilities they concern, denominated either in national currency or in foreign exchange. The capital movements listed in this Nomenclature are taken to cover: — all the operations necessary for the purposes of capital movements: conclusion and performance of the transaction and related transfers. The transaction is generally between residents of different Member States although some capital movements are carried out by a single person for his own account (e.g. transfers of assets belonging to emigrants), — operations carried out by any natural or legal person ( 1 ) , including operations in respect of the assets or liabilities of Member States or of other public administrations and agencies, subject to the provisions of Article 68 (3) of the Treaty, — access for the economic operator to all the financial techniques available on the market approached for the purpose of carrying out the operation in question. For example, the concept of acquisition of securities and other financial instruments covers not only spot transactions but also all the dealing techniques available: forward transactions, transactions carrying an option or warrant, swaps against other assets, etc. Similarly, the concept of operations in current and deposit accounts with financial institutions, includes not only the opening and placing of funds on accounts but also forward foreign exchange transactions, irrespective of whether these are intended to cover an exchange risk or to take an open foreign exchange position, — operations to liquidate or assign assets built up, repatriation of the proceeds of liquidation thereof ( 1 ) or immediate use of such proceeds within the limits of Community obligations, — operations to repay credits or loans. This Nomenclature is not an exhaustive list for the notion of capital movements — whence a heading XIII — F. ‘Other capital movements — Miscellaneous'. It should not therefore be interpreted as restricting the scope of the principle of full liberalization of capital movements as referred to in Article 1 of the Directive. I — DIRECT INVESTMENTS ( 1 ) 1. Establishment and extension of branches or new undertakings belonging solely to the person providing the capital, and the acquisition in full of existing undertakings. 2. Participation in new or existing undertaking with a view to establishing or maintaining lasting economic links. 3. Long-term loans with a view to establishing or maintaining lasting economic links. 4. Reinvestment of profits with a view to maintaining lasting economic links. A — Direct investments on national territory by non-residents ( 1 ) B — Direct investments abroad by residents ( 1 ) II — INVESTMENTS IN REAL ESTATE (not included under I) ( 1 ) A — Investments in real estate on national territory by non-residents B — Investments in real estate abroad by residents III — OPERATIONS IN SECURITIES NORMALLY DEALT IN ON THE CAPITAL MARKET (not included under I, IV and V) (a) Shares and other securities of a participating nature ( 1 ) . (b) Bonds ( 1 ) . A — Transactions in securities on the capital market 1. Acquisition by non-residents of domestic securities dealt in on a stock exchange ( 2 ) . 2. Acquisition by residents of foreign securities dealt in on a stock exchange. 3. Acquisition by non-residents of domestic securities not dealt in on a stock exchange ( 2 ) . 4. Aquisition by residents of foreign securities not dealt in on a stock exchange. B — Admission of securities to the capital market ( 2 ) (i) Introduction on a stock exchange ( 2 ) . (ii) Issue and placing on a capital market ( * ). 1. Admission of domestic securities to a foreign capital market. 2. Administration of foreign securities to the domestic capital market. IV — OPERATIONS IN UNITS OF COLLECTIVE INVESTMENT UNDERTAKINGS ( 2 ) (a) Units of undertakings for collective investment in securities normally dealt in on the capital market (shares, other equities and bonds). (b) Units of undertakings for collective investment in securities or instruments normally dealt in on the money market. (c) Units of undertakings for collective investment in other assets. A — Transactions in units of collective investment undertakings 1. Acquisition by non-residents of units of national undertakings dealt in on a stock exchange. 2. Acquisition by residents of units of foreign undertakings dealt in on a stock exchange. 3. Acquisition by non-residents of units of national undertakings not dealt in on a stock exchange. 4. Acquisition by residents of units of foreign undertakings not dealt in on a stock exchange. B — Administration of units of collective investment undertakings to the capital market (i) Introduction on a stock exchange. (ii) Issue and placing on a capital market. 1. Admission of units of national collective investment undertakings to a foreign capital market. 2. Admission of units of foreign collective investment undertakings to the domestic capital market. V — OPERATIONS IN SECURITIES AND OTHER INSTRUMENTS NORMALLY DEALT IN ON THE MONEY MARKET ( 2 ) A — Transactions in securities and other instruments on the money market 1. Acquisition by non-residents of domestic money market securities and instruments. 2. Acquisition by residents of foreign money market securities and instruments. B — Admission of securities and other instruments to the money market (i) Introduction on a recognized money market ( * ). (ii) Issue and placing on a recognized money market. 1. Admission of domestic securities and instruments to a foreign money market. 2. Admission of foreign securities and instruments to the domestic money market. VI — OPERATIONS IN CURRENT AND DEPOSIT ACCOUNTS WITH FINANCIAL INSTITUTIONS ( 3 ) A — Operations carried out by non-residents with domestic financial institutions B — Operations carried out by residents with foreign financial institutions VII — CREDITS RELATED TO COMMERCIAL TRANSACTIONS OR TO THE PROVISION OF SERVICES IN WHICH A RESIDENT IS PARTICIPATING ( 3 ) 1. Short-term (less than one year). 2. Medium-term (from one to five years). 3. Long-term (five years or more). A — Credits granted by non-residents to residents B — Credits granted by residents to non-residents VIII — FINANCIAL LOANS AND CREDITS (not included under I, VII and XI) ( 3 ) 1. Short-term (less than one year). 2. Medium-term (from one to five years). 3. Long-term (five years or more). A — Loans and credits granted by non-residents to residents B — Loans and credits granted by residents to non-residents IX — SURETIES, OTHER GUARANTEES AND RIGHTS OF PLEDGE A — Granted by non-residents to residents B — Granted by residents to non-residents X — TRANSFERS IN PERFORMANCE OF INSURANCE CONTRACTS A — Premiums and payments in respect of life assurance 1. Contracts concluded between domestic life assurance companies and non-residents. 2. Contracts concluded between foreign life assurance companies and residents. B — Premiums and payments in respect of credit insurance 1. Contracts concluded between domestic credit insurance companies and non-residents. 2. Contracts concluded between foreign credit insurance companies and residents. C — Other transfers of capital in respect of insurance contracts XI — PERSONAL CAPITAL MOVEMENTS A — Loans B —Gifts and endowments C — Dowries D — Inheritances and legacies E — Settlement of debts by immigrants in their previous country of residence F — Transfers of assets constituted by residents, in the event of emigration, at the time of their installation or during their period of stay abroad G — Transfers, during their period of stay, of immigrants' savings to their previous country of residence XII — PHYSICAL IMPORT AND EXPORT OF FINANCIAL ASSETS A — Securities B — Means of payment of every kind XIII — OTHER CAPITAL MOVEMENTS A — Death duties B — Damages (where these can be considered as capital) C — Refunds in the case of cancellation of contracts and refunds of uncalled-for payments (where these can be considered as capital) D — Authors' royalties: patents, designs, trade marks and inventions (assignments and transfers arising out of such assignments) E — Transfers of the monies required for the provision of services (not included under VI) F — Miscellaneous EXPLANATORY NOTES For the purposes of this Nomenclature and the Directive only, the following expressions have the meanings assigned to them respectively: Direct investments Investments of all kinds by natural persons or commercial, industrial or financial undertakings, and which serve to establish or to maintain lasting and direct links between the person providing the capital and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity. This concept must therefore be understood in its widest sense. The undertakings mentioned under I-1 of the Nomenclature include legally independent undertakings (wholly-owned subsidiaries) and branches. As regards those undertakings mentioned under I-2 of the Nomenclature which have the status of companies limited by shares, there is participation in the nature of direct investment where the block of shares held by a natural person of another undertaking or any other holder enables the shareholder, either pursuant to the provisions of national laws relating to companies limited by shares or otherwise, to participate effectively in the management of the company or in its control. Long-term loans of a participating nature, mentioned under I-3 of the Nomenclature, means loans for a period of more than five years which are made for the purpose of establishing or maintaining lasting economic links. The main examples which may be cited are loans granted by a company to its subsidiaries or to companies in which it has a share and loans linked with a profit-sharing arrangement. Loans granted by financial institutions with a view to establishing or maintaining lasting economic links are also included under this heading. Investments in real estate Purchases of buildings and land and the construction of buildings by private persons for gain or personal use. This category also includes rights of usufruct, easements and building rights. Introduction on a stock exchange or on a recognized money market Access — in accordance with a specified procedure — for securities and other negotiable instruments to dealings, whether controlled officially or unofficially, on an officially recognized stock exchange or in an officially recognized segment of the money market. Securities dealt in on a stock exchange (quoted or unquoted) Securities the dealings in which are controlled by regulations, the prices for which are regularly published, either by official stock exchanges (quoted securities) or by other bodies attached to a stock exchange — e.g. committees of banks (unquoted securities). Issue of securities and other negotiable instruments Sale by way of an offer to the public. Placing of securities and other negotiable instruments The direct sale of securities by the issuer of by the consortium which the issuer has instructed to sell them, with no offer being made to the public. Domestic or foreign securities and other instruments Securities according to the country in which the issuer has his principal place of business. Acquisition by residents of domestic securities and other instruments issued on a foreign market ranks as the acquisition of foreign securities. Shares and other securities of a participating nature Including rights to subscribe to new issues of shares. Bonds Negotiable securities with a maturity of two years or more from issue for which the interest rate and the terms for the repayment of the principal and the payment of interest are determined at the time of issue. Collective investment undertakings Un[d]ertakings: — the object of which is the collective investment in transferable securities or other assets of the capital they raise and which operate on the principle of risk-spreading, and — the units of which are, at the request of holders, under the legal, contractual or statutory conditions governing them, repurchased or redeemed, directly or indirectly, out of those undertakings' assets. Action taken by a collective investment undertaking to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such repurchase or redemption. Such undertakings may be constituted according to law either under the law of contract (as common funds managed by management companies) or trust law (as unit trusts) or under statute (as investment companies). For the purposes of the Directive, ‘common funds' shall also include unit trusts. Securities and other instruments normally dealt in on the money market Treasury bills and other negotiable bills, certificates of deposit, bankers' acceptances, commercial paper and other like instruments. Credits related to commercial transactions or to the provision of services Contractual trade credits (advances or payments by instalment in respect of work in progress or on order and extended payment terms, whether or not involving subscription to a commercial bill) and their financing by credits provided by credit institutions. This category also includes factoring operations. Financial loans and credits Financing of every kind granted by financial institutions, including financing related to commercial transactions or to the provision of services in which no resident is participating. This category also includes mortgage loans, consumer credit and financial leasing, as well as back-up facilities and other note-issuance facilities. Residents or non-residents Natural and legal persons according to the definitions laid down in the exchange control regulations in force in each Member State. Proceeds of liquidation (of investments, securities, etc.) Proceeds of sale including any capital appreciation, amount of repayments, proceeds of execution of judgements, etc. Natural or legal persons As defined by the national rules. Financial institutions Banks, savings banks and institutions specializing in the provision of short-term, medium-term and long-term credit, and insurance companies, building societies, investment companies and other institutions of like character. Credit institutions Banks, savings banks and institutions specializing in the provision of short-term, medium-term and long-term credit. ( 1 ) See Explanatory Notes below. ( 2 ) See Explanatory Notes below. ( 3 ) See Explanatory Notes below."
"[58] Where the company making the distribution and the shareholder to whom it is paid are not resident in the same Member State, the Member State in which the company making the distribution is resident, that is to say the Member State in which the profits are derived, is not in the same position, as regards the prevention or mitigation of a series of charges to tax and of economic double taxation, as the Member State in which the shareholder receiving the distribution is resident. [59] It must be held in that regard, first, that to require the Member State in which the company making the distribution is resident to ensure that profits distributed to a non-resident shareholder are not liable to a series of charges to tax or to economic double taxation, either by exempting those profits from tax at the level of the company making the distribution or by granting the shareholder a tax advantage equal to the tax paid on those profits by the company making the distribution, would mean in point of fact that that State would be obliged to abandon its right to tax a profit generated through an economic activity undertaken on its territory. [60] Secondly, as regards a procedure for preventing or mitigating economic double taxation by the grant of a tax advantage to the ultimate shareholder, it must be pointed out that it is usually the Member State in which the latter is resident that is best placed to determine the shareholder's ability to pay tax (see, to that effect, Schumacker , paragraphs 32 and 33, and D. , paragraph 27). Likewise, in the case of shareholdings to which Directive 90/435 applies, Article 4(1) of that directive requires the Member State of the parent company which receives profits distributed by a subsidiary which is resident in another Member State, and not the latter State, to avoid a series of charges to tax, either by refraining from taxing such profits or by taxing such profits while authorising that parent company to deduct from the amount of tax due that fraction of the corporation tax paid by the subsidiary which relates to those profits and, if appropriate, the amount of the withholding tax levied by the Member State in which the subsidiary is resident."
"[24] However, the situation of a resident parent company wishing to form a single tax entity with a resident subsidiary and the situation of a resident parent company wishing to form a single tax entity with a non-resident subsidiary are objectively comparable with regard to the objective of a tax scheme such as that at issue in the main proceedings in so far as each seeks to benefit from the advantages of that scheme, which, in particular, allows the profits and losses of the companies constituting the single tax entity to be consolidated at the level of the parent company and the transactions carried out within the group to remain neutral for tax purposes ."
" 39. The Spanish, French and Portuguese Governments further submit that a company such as the applicant in the main proceedings does not suffer any disadvantage in comparison with a company that transfers its place of management within a Member State. In view of the fact that the exchange rate gain in Netherlands guilders on a claim expressed in sterling disappeared when the place of effective management of National Grid Indus was transferred to the United Kingdom, that company was, in the view of those governments, taxed on a capital gain that had been realised. A transfer of the place of management within the Member State concerned, by contrast, would not have given rise to the realisation of any capital gains. 40. That argument must be rejected. The tax at issue in the main proceedings is not charged on realised capital gains. The exchange rate gain that was taxed in the context of those proceedings relates to an unrealised capital gain which did not produce any income for National Grid Indus. Such an unrealised capital gain would not have been taxed if National Grid Indus had transferred its place of effective management within Netherlands territory ."
"31 So far as concerns the existence of any justification for the restriction on freedom of establishment that has been found and the justification's proportionality, the Court held in National Grid Indus , paragraph 86, that Article 49 TFEU precludes legislation of a Member State which prescribes the immediate recovery of tax on unrealised capital gains relating to assets of a company transferring its place of effective management to another Member State at the very time of that transfer. 32 Furthermore, as is apparent from paragraph 73 of the judgment in National Grid Indus , national legislation offering a company transferring its place of effective management to another Member State the choice between, first, immediate payment of the amount of tax and, secondly, deferred payment of the amount of tax, possibly together with interest in accordance with the applicable national legislation, would constitute a measure less harmful to freedom of establishment than the measures at issue in the main proceedings."
" 33 However, the Kingdom of Denmark points out that the position taken by the Court in the National Grid Indus judgment, above, assumes that the assets being transferred will actually be realised. On the other hand, when this tax on unrealised capital gains is generated by assets that are not intended to be realised after their transfer, it would be proportionate to the objective being pursued, consistent with ensuring that taxation power distribution between Member States be preserved, in order to demand the recovery of tax when a company transfers its assets to another Member State. 34 Furthermore, the Kingdom of Denmark maintains that, in the absence of any harmonisation of tax regulations when transferring assets between Member States, there are no other less radical ways of achieving this objective satisfactorily. 35 As a preliminary point, please note that the scope of the principle expressed in the National Grid Indus judgment, above, is not limited to unrealised capital gains made in the territory of a Member State and realised after the transfer of the assets to another Member State (see National Grid Indus judgment, paragraphs 68 and 70). 36 Please also note that since the sum of unrealised capital gains tax on the assets is definitively determined when a company transfers those assets to another Member State, the fact that some of the said assets may not be assigned after their transfer to the host State does not in itself deprive the State of origin of the possibility of recovering that sum. 37 Indeed, since Member States have the right to tax capital gains generated when the assets in question were on their territory, they have the power to provide for a cause for this taxation other than the effective transfer, in order to guarantee the taxation of assets which are not destined for transfer, and less detrimental to the freedom of establishment than the levy at the time of transfer. 38 The fact that solutions chosen in other Member States may differ from the one the Kingdom of Denmark is likely to use does not affect the possibility of the Kingdom of Denmark receiving tax on unrealised capital gains on those assets after the transfer of an asset to another Member State, provided that the definitive amount of tax is determined at the time of said transfer ."
" 71. In the present case, the fact that either an unrealised capital gain or a realised capital gain is at issue is irrelevant in this regard. What is of importance is that, as regards one or other of those capital gains, similar transactions, carried out in the purely domestic context of a Member State, unlike a cross-border transaction, did not result in the immediate taxation of those capital gains ."
" 49 As regards the recovery of such a tax, the Court has held that it was appropriate to give the taxable person the choice between, on the one hand, immediate payment of that tax, and, on the other hand, deferred payment of that tax, together with, if appropriate, interest in accordance with the applicable national legislation (judgment in Commission v Germany, C-591/13, EU:C:2015:230 , paragraph 67 and the case-law cited). 50 In that context, the Court further held that account should also be taken of the risk of non-recovery of the tax, which increases with the passage of time, which may be taken into account by the Member State in question, in its national legislation applicable to deferred payment of tax liabilities (see, to that effect, National Grid Indus, C-371/10, EU:C:2011:785 , paragraph 74). 51 In the present case, the question therefore arises whether a staggered recovery of the amount of tax at issue by 10 annual instalments may be a proportionate measure to attain the objective of preserving the allocation of taxation powers between the Member States ."
" That finding cannot be called into question by the fact that, in the circumstances of the main proceedings, the gains were made after the establishment of the amount of the tax, but before that tax became payable, given that the disproportionality of the legislation at issue in the main proceedings is due to the fact that that legislation makes no provision for the taxpayer being able to defer the time when the tax payable is paid " (see paragraph [60]). Thus, the fact that the trustees had the ability to pay the exit tax when that tax became due (as a result of the post-exit disposal) was not relevant to the question of whether the charge to tax was disproportionate. As noted in paragraph [56] of the opinion of Advocate General Kokott in Panayi , the existing regime was nevertheless still disproportionate because the trustees were obliged to pay the tax one year earlier than they would have been if no change in residence had occurred and were therefore being treated disadvantageously in comparison with trusts which remained resident in the UK and then made the disposal; and (f) in A Oy , the CJEU held that the mere fact that the national legislation in question, in conformity to Article 10(2) of Council Directive 90/434/EEC (the "
"The no gain/no loss rule in TCGA92/S171(1) ensures that assets can generally be moved around a group of companies without any immediate capital gains consequences[.]). This recognises that business activities carried on within the overall economic ownership of a corporate group, within the charge to corporation tax, should, in broad terms, be tax neutral. This is achieved by fixing both the consideration received for the asset by the transferor and the consideration given for the asset by the transferee. The transferor has neither chargeable gain nor allowable loss. The transferee effectively takes over the transferor's capital gains cost, augmented by indexation allowance as appropriate…. Therefore a chargeable gain or allowable loss will accrue only when an asset is disposed of outside the group (or the part of the group that is chargeable to corporation tax on chargeable gains) and that gain or loss will reflect the economic gain or loss throughout the group's period of ownership…" and has been recognised by HM Treasury when it said the following in its consultation document of February 2010 in relation to simplifying the chargeable gains tax rules: " 1.8 As far as possible, the capital gains rules for groups of companies are intended to recognise that a group of companies operates as a single economic entity. This principle underpins the ‘no-gain-no-loss' asset transfer rule [f/n: Section 171,Taxation of Chargeable Gains Act 1992 ], which allows companies within the same corporate group to transfer assets between one another on a tax-neutral basis."
"[30] From this it follows that the interpretative obligation decreed by s 3 is of an unusual and far-reaching character. Section 3 may require a court to depart from the unambiguous meaning the legislation would otherwise bear. In the ordinary course the interpretation of legislation involves seeking the intention reasonably to be attributed to Parliament in using the language in question. Section 3 may require the court to depart from this legislative intention, that is, depart from the intention of the Parliament which enacted the legislation. The question of difficulty is how far, and in what circumstances, s 3 requires a court to depart from the intention of the enacting Parliament. The answer to this question depends upon the intention reasonably to be attributed to Parliament in enacting s 3. [31] On this the first point to be considered is how far, when enacting s 3, Parliament intended that the actual language of a statute, as distinct from the concept expressed in that language, should be determinative. Since s 3 relates to the "interpretation" of legislation, it is natural to focus attention initially on the language used in the legislative provision being considered. But once it is accepted that s 3 may require legislation to bear a meaning which departs from the unambiguous meaning the legislation would otherwise bear, it becomes impossible to suppose Parliament intended that the operation of s 3 should depend critically upon the particular form of words adopted by the parliamentary draftsman in the statutory provision under consideration. That would make the application of s 3 something of a semantic lottery. If the draftsman chose to express the concept being enacted in one form of words, s 3 would be available to achieve Convention-compliance. If he chose a different form of words, s 3 would be impotent. [32] From this the conclusion which seems inescapable is that the mere fact the language under consideration is inconsistent with a Convention-compliant meaning does not of itself make a Convention-compliant interpretation under s 3 impossible. Section 3 enables language to be interpreted restrictively or expansively. But s 3 goes further than this. It is also apt to require a court to read in words which change the meaning of the enacted legislation, so as to make it Convention-compliant. In other words, the intention of Parliament in enacting s 3 was that, to an extent bounded only by what is "possible", a court can modify the meaning, and hence the effect, of primary and secondary legislation. [33] Parliament, however, cannot have intended that in the discharge of this extended interpretative function the courts should adopt a meaning inconsistent with a fundamental feature of legislation. That would be to cross the constitutional boundary s 3 seeks to demarcate and preserve. Parliament has retained the right to enact legislation in terms which are not Convention-compliant. The meaning imported by application of s 3 must be compatible with the underlying thrust of the legislation being construed. Words implied must, in the phrase of my noble and learned friend Lord Rodger of Earlsferry, "go with the grain of the legislation"
"[88] The decision in the Ghaidan case is a powerful statement of the court's preparedness to interpret legislation so that it is compatible with human rights. The speeches, all of which repay careful study, contain extremely valuable guidelines. The House of Lords has recognized the force of the mandatory obligation in s 3. However, s 3 permits only interpretation, not the rewriting of legislation which goes beyond mere interpretation. I would add that in s 3 the words "in a way which is compatible with the Convention rights" make it clear that the courts have a choice as to precisely how to interpret the legislation to achieve the objective in s 3, namely that, where possible, the legislation should be compatible with human rights. [89] The critical point made by the House of Lords in the Ghaidan case can be found in the passage from the speech of Lord Nicholls which I have set out above. Lord Nicholls accepts that the effect of interpretation in accordance with s 3 of the 1998 Act may be to change the meaning of the legislation but, as he explains, the meaning adopted by the court must not conflict with a fundamental feature of the legislation. He adopts the words of Lord Rodger that the interpretation chosen by the court must "go with the grain of the legislation"
" 68 That conclusion is not called into question by the fact that, in a situation where the immediate collection of the tax payable would have consequences that would be difficult for the taxpayer to bear, that tax regime provides for the possibility of payment of that tax in instalments. Leaving aside the fact that the instalment-payment measure is possible only in that specific situation, it is incapable of eliminating, in such a situation, the cash-flow disadvantage inherent in the obligation on the taxpayer to pay, at the time of the transfer of his domicile to Switzerland, a proportion of the tax payable on the unrealised capital gains with respect to the shares concerned. Moreover, that measure remains more onerous, for the taxpayer, than a measure that permits the deferral, until the disposal of those shares, of payment of the tax payable."
"65. According to National Grid Indus and the Commission, the immediate recovery of the tax at the time of the transfer of a company's place of effective management to another Member State is disproportionate. The recovery of tax at the time when the capital gains are actually realised would be a less restrictive measure than that provided for by the legislation at issue in the main proceedings, and would not endanger the allocation of powers of taxation between the Member States."
"Nor can Parliament have intended that s 3 should require courts to make decisions for which they are not equipped. There may be several ways of making a provision Convention-compliant, and the choice may involve issues calling for legislative deliberation."
"[20] My Lords, I would, for my part, reject the premise on which these two alternatives are based. The UK instituted a VAT scheme for the repayment by the Commissioners of input tax that enabled claims for repayment to be made without limit of time. That was a surprising, and perhaps unintended, feature of the scheme but was a lawful feature. There is no suggestion that the scheme failed properly to implement the Sixth Directive. The scheme was then amended by the introduction of a three year time limit that was to apply not only prospectively but also retrospectively with no transitional period during which those, like Mr Fleming and Condé Nast, who had been sitting on their claims, would be able to take into account the change in the law and bring their claims before they became time barred. Whether a reasonable transitional period for claims to be brought that on1 May 1997 were already at least three years old should have six months, 12 months or some other period from1 May 1997 is open to argument but is not in point. The important fact is that there was no transitional period. The VAT regime is not judge-made and is not made by the Commissioners. It is a statutory scheme consisting of primary legislation made by Parliament and secondary legislation made by others under powers conferred by Parliament. The Commissioners have management powers conferred by Parliament but these powers do not extend to enabling the Commissioners to amend the statutory scheme. The Business Briefs published by the Commissioners can properly be regarded as published pursuant to the Commissioners' management powers but are not a means enabling the Commissioners to amend the VAT régime made by primary and secondary legislation. The two Business Briefs, to which reference has been made in this Opinion, contained provisions purporting to extend the period within which certain s 80 claims which had accrued to the taxpayers before the amendment to s 80(4) came into effect could be brought. These provisions have been described as "concessions"
". . . it is settled case law that the incompatibility of national legislation with Community provisions can be finally remedied only by means of national provisions of a binding nature which have the same legal force as those which must be amended. Mere administrative practices cannot be regarded as constituting the proper fulfilment of obligations under Community law."
"The principle of effectiveness merely requires that such retroactive application should not go beyond what is necessary in order to ensure observance of that principle. It must, therefore, be permissible to apply the new period for initiating proceedings to actions brought after expiry of an adequate transitional period, assessed at six months in a case such as the present, even where those actions concern the recovery of sums paid before the entry into force of the legislation laying down the new period."
". . . incompatibility of national legislation with Community provisions can be finally remedied only by means of national provisions of a binding nature which have the same legal force as those which must be amended.""
"[58] Third, the conforming interpretation advanced by counsel for HMRC reflects and excepts from the operation of the CFC Legislation precisely that element of it which the ECJ held to constitute the hindrance to freedom of establishment. That is, by definition, sufficiently certain for a conforming interpretation whether or not the exclusion from the exception of wholly artificial transactions is included. There can be no objection to such an exclusion for the like reason. It follows precisely the formulation of the justification for the hindrance which the ECJ found to be acceptable. [59] It is the case that there are likely to be other ways of achieving conformity, for example s 751A inserted into the CFC Legislation by theFinance Act 2007 , and the choice of one rather than another may well involve policy decisions. But if that consideration alone could render a conforming interpretation illegitimate it would considerably restrict the occasions in which a conforming interpretation could be adopted and lead to an increase in disapplications. The choice of a conforming interpretation which faithfully follows a conclusion of the ECJ, as in this case, does not in my view trespass on the forbidden ground of legislation ."
"192 As the Court stated in Konle , any national measure adopted after a date laid down in that way is not, by that fact alone, automatically excluded from the derogation laid down in the Community measure in question. If the provision is, in substance, identical to the previous legislation or is limited to reducing or eliminating an obstacle to the exercise of Community rights and freedoms in the earlier legislation, it will be covered by the derogation. By contrast, legislation based on an approach which is different from that of the previous law and establishes new procedures cannot be regarded as legislation existing at the date set down by the Community measure in question (see Konle , paragraphs 52 and 53)."
" which appeared at the start of "
"16. Even though, according to their wording, the provisions of the EC Treaty concerning freedom of establishment are directed to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (Case C-264/96 ICI[1998] ECR I-4695 , paragraph 21;Case C-298/05 Columbus Container Services[2007] ECR I-10451 , paragraph 33; and Lidl Belgium , paragraph 19)."
"34. That argument cannot be upheld. The national provision at issue in the main proceedings requires that there be a foreign element, clearly relevant to the freedom of establishment conferred by the Treaty, namely, for type A share transfers, the fact that the transferee company is established in another Member State, and, for type B share transfers, the fact that a company established in another Member State has a holding in the transferee company and that this foreign element is the basis for a difference in tax treatment within one Member State."
"61 …it must be held that a difference in treatment between resident subsidiaries which is based on the place where their parent company has its seat constitutes a restriction on freedom of establishment, since it makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the Member State which adopts that measure (see Lankhorst-Hohorst, paragraph 32)."
"92 The answer to Questions 1 and 3 must therefore be that Article 43 EC precludes legislation of a Member State which restricts the ability of a resident company to deduct, for tax purposes, interest on loan finance granted by a direct or indirect parent company which is resident in another Member State or by a company which is resident in another Member State and is controlled by such a parent company, without imposing that restriction on a resident company which has been granted loan finance by a company which is also resident, unless, first, that legislation provides for a consideration of objective and verifiable elements which make it possible to identify the existence of a purely artificial arrangement, entered into for tax reasons alone, and allows taxpayers to produce, if appropriate and without being subject to undue administrative constraints, evidence as to the commercial justification for the transaction in question and, secondly, where it is established that such an arrangement exists, such legislation treats that interest as a distribution only in so far as it exceeds what would have been agreed upon at arm's length."
"94 In that regard, it must be noted, first of all, that, as was stated in paragraph 61 of this judgment, national legislation such as the legislation at issue in the main proceedings which, in treating interest paid by a resident subsidiary to a parent company as a distribution, applies a difference in treatment between resident subsidiaries which is based on the place where their parent company has its seat, constitutes a restriction on freedom of establishment, since it makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the Member State which adopts such a measure. 95 It follows that legislation of this kind constitutes a restriction on freedom of establishment which is prohibited, in principle, by Article 43 EC, both where a resident borrowing company is granted a loan by a company which is established in another Member State and has a direct or indirect holding in the capital of the borrowing company, conferring on it definite influence on the decisions of that company and allowing it to determine its activities, and where a borrowing company is granted a loan by another non-resident company which, irrespective of where it is resident, is itself controlled by a company which is resident in another Member State and which has, directly or indirectly, such a holding in the capital of the borrowing company. 96 The answer given to Question 1 therefore also applies to the situation referred to in the first indent to Question 2. 97 As regards the situations referred to in the second, third and fourth indents to Question 2, it must be noted, as was stated in paragraph 36 of this judgment, that Article 43 EC, read in conjunction with Article 48 EC, entails, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community, the right to exercise their activity in the Member State concerned through a subsidiary, branch or agency. 98 Article 43 EC has accordingly no bearing on the application of national legislation such as the legislation at issue in the main proceedings to a situation in which a resident company is granted a loan by a company which is resident in another Member State and which does not itself have a controlling shareholding in the borrowing company and where each of those companies is directly or indirectly controlled by a common parent company which is resident, for its part, in a non-member country. 99 Where, in such a situation, the Member State which has adopted that legislation treats interest paid by the borrowing company as a distribution, that measure affects freedom of establishment, not as regards the lending company, but only as regards the parent company which enjoys a level of control over each of the other companies concerned allowing it to influence the funding decisions of those companies. In so far as that related company is not established in a Member State for the purposes of Article 48 EC, Article 43 EC is not applicable. 100 For the same reasons, Article 43 EC has no bearing on the application of that legislation to a situation in which both the lending company and the common parent company are resident in a non-member country, nor does it have any bearing on a situation in which a lending company which is resident in another Member State and does not itself control the borrowing company grants the loan through a branch established in a non-member country, where the common parent company is also resident in a non-member country. 101 As regards the other provisions of the Treaty relied on by the claimants in the main proceedings, it must be pointed out that, as was stated in paragraphs 33 and 34 of this judgment, legislation such as the legislation at issue in the main proceedings, which is targeted only at relations within a group of companies, primarily affects freedom of establishment. Even if it were to be accepted that such legislation might have restrictive effects on the freedom to provide services and the free movement of capital, such effects must be seen as an unavoidable consequence of any restriction on freedom of establishment and do not justify an independent examination of that legislation in the light of Articles 49 EC and 56 EC. 102 The answer to Question 2 must therefore be that Article 43 EC has no bearing on legislation of a Member State, such as the legislation referred to in Question 1, where that legislation applies to a situation in which a resident company is granted a loan by a company which is resident in another Member State or in a non-member country and which does not itself control the borrowing company and where each of those companies is controlled, directly or indirectly, by a common parent company which is resident in a non-member country."