A UK taxpayer has won an important victory in the Court of Appeal against the UK tax authorities who were appealing against a previous decis...

A UK taxpayer has won an important victory in the Court of Appeal against the UK tax authorities who were appealing against a previous decision made last April in the High Court in London. The Revenue had contended that the original judge had not been entitled to overrule a decision of the special commissioners - the representatives of the UK’s tax collectors - in favour of the Revenue concerning a matter of UK residence. The case of Wood v Holden involved a complex scheme designed to avoid capital gains tax on part of the gain on the sale of a group of trading companies which the taxpayer, Mr Wood, had built up over a number of years. It involved a number of intricate transactions, and the participation of three companies which were incorporated outside the UK. One of the steps in the scheme involved a British Virgin Island's company, CIL, selling a UK company, Holdings, to a Netherlands company, Eulalia. The scheme assumed that CIL and Eulalia were not merely incorporated outside the UK but also resident outside the UK. The Court of Appeal held that the judge had correctly decided that the only decision available to the special commissioners was that the company was resident in the Netherlands. This was on the basis that the directors of the company had not had their authority usurped by a third party nor had they stood aside and allowed someone to take control. Private client legal experts have been quick to emphasise the importance of the case. “The Court of Appeal emphasised the importance of distinguishing between cases where management and control was exercised through the board of directors and general meetings and cases where those functions were exercised independently of or without regard to those bodies," said Jonathan Conder, head of private clients at City law firm Macfarlanes. He added: "In the former case an outsider would merely propose, advise and influence the decisions of these bodies; in the latter he would dictate how those decisions were taken."