UK: Non-UK Companies and Trusts - UK Management and Control

Last Updated: 30 March 2011
Article by Patricia Milner

Many family structures have to deal with the risk of a non-UK company or trust being treated as resident in the UK for tax purposes. Concern arises where there are directors or shareholders resident in the UK or, in relation to non-UK fiduciary structures, UK beneficiaries or other persons involved in the administration who could be regarded as having too much influence.

These risks apply equally to businesses as well as family holding structures, investment vehicles and trust companies.

Management and control

If the central management and control of a non-UK company is carried out in the UK, then the company itself – and any trusts of which it is sole trustee – will be UK tax resident. 'Management and control' refers to the highest decision-making level, and need not even involve the directors themselves if the directors usually follow the effective instructions of another person, or if their decisions are overseen in some other way that inhibits their freedom. The key question is therefore whether the UK resident directors, shareholders or beneficiaries are seen to control the decision-making process from the UK, or whether the remaining or actual directors are able to make genuinely independent decisions and have the requisite skill and experience to act on their own authority.

It is important to remember that there is a distinction between a company's management and its administration (e.g. keeping of the company's books and records and filing the requisite forms with the authorities). A company can be managed and controlled from the UK even if it is administered from outside the UK. The essential question rather is where the fundamental decisions about the company are taken: it can be enough that the directors signed the relevant resolutions outside the UK (even on advice from UK advisors) so long as this act itself amounts to the free exercise of their discretion, and their role as directors has not effectively been usurped by some other person. Conversely, it is not enough to provide a paper trail if all that is happening outside the UK is effectively a rubber-stamping exercise.

Laerstate BV v HMRC

These questions were considered in England in the First Tier Tribunal in the case of Laerstate BV v HMRC. The case concerned a dispute about the UK tax-residence status of a Netherlands company. The tribunal concluded that the company was UK tax-resident because, although it apparently carried out certain high-level managerial functions outside the UK, the company's management was, in reality, undertaken from the UK by its sole shareholder.

Activities carried out by the directors and shareholders

The company pointed to the significant number of formal managerial meetings that had been held in the Netherlands and various other locations outside the UK, many of which the owner did not actually attend, so that the company's other officer appeared to be acting alone. The Tribunal, however, refused to look simply at where resolutions had been signed. They looked at all the activities of the shareholder/director in the UK, including meetings with lawyers and other advisers.

The Tribunal considered whether the activities carried on both inside and outside the UK were concerned only with ministerial matters and matters of good housekeeping, or with policy, strategic or management matters relating to the conduct of the business of the company. The Tribunal thought that the activities of the shareholder/director in the UK were related to the latter rather than the former, and that these activities included making decisions about the company's business.

Consideration of wishes of the shareholder

The Tribunal found that there is nothing to prevent a majority shareholder (whether a parent company or individual) from indicating how the directors of the company should act. If the directors consider the shareholder's wishes and act on them, it is still their decision. The borderline is between the directors making the decision and not making any decision at all.

What are the conclusions which can be drawn from this case?

  • The Tribunal acknowledged that merely having a UK resident director (even if one of two) will not mean that the company is UK resident.
  • The fact that the directors take account of the wishes of a UK resident shareholder will not mean that the company is UK resident, provided that they have the minimum amount of information necessary to take a decision and actually take a decision whether or not to follow the shareholder's wishes.
  • The directors should have enough information to enable them (on an objective test) to take a proper decision. If the decision taken is inadvisable or in breach of trust (but based on a request from the shareholder) then they are more likely to be seen as simply acting on the wishes of the shareholder.
  • If any action is taken in the UK by a director (or a shareholder if the directors are not taking decisions appropriately) concerned with the policy, strategic and management matters of the company, and which constitutes the realistic positive management of the company, then the effective management of the company is likely to be in the UK. It is important therefore to consider the nature of what is done both in the UK and outside the UK.

Although this is only a first instance decision it nevertheless gives an interesting indication of the extent to which activities can be carried on in the UK without resulting in a non-UK company becoming UK tax resident.

Garron v The Queen (Canada)


In the Garron case the Canadian court considered the residence status of two trusts with the same Barbados resident corporate trustee. The trusts held shares in Canadian holding companies, which on a sale realized substantial capital gains. Amounts on account of potential tax on the gain had been remitted to the government pursuant to withholding procedures under the Canadian Income Tax Act. Subsequently the trusts sought a return of the amounts withheld, claiming an exemption pursuant to a double tax treaty between Canada and Barbados which provided that "gains from the alienation of property... may be taxed in the Contracting State of which the alienator is a resident (i.e. Barbados)."

The question for the court was whether the trusts were resident in Barbados or Canada for treaty purposes, at the time of share sale. Barbados lacks statutory or judicial authority concerning the residence of a trust, but it was put to the court that the residence of a trust is determined by reference to the place of residence of the trustees, upon the assumption that the control and administration of the trust is exercised in that place by resident trustees. On the other side, the minister submitted that the trusts were liable to tax under the Income Tax Act by being resident. Without a legislative definition of resident, general principles would be applied and the minister submitted that the trusts were resident in Canada by reason of who actually controlled the trusts, namely two Canadian individuals (D&G) who were beneficiaries of the trust and not the Barbados trustee, who simply complied with D&G's decisions.

Management and control in the corporate context

The court determined that a management and control test, similar to that applied for companies, should be applied to a trust (and the court preferred this over "mind and management"). The court identified that in the corporate context, management and control had usually been found to reside in a board of directors, even though the directors might be under significant influence from shareholders and others. The threshold level of decision making for the directors could be quite low, but it should be clear that no one had dictated those decisions – i.e., to find that management and control is with shareholders would require something more than evidence of shareholder influence.

Management and control in the trust context

The court considered the role of the Barbados trust company and evidence that the trustee's role was largely administrative in relation to the share sale. It noted that memoranda suggested that the trustee would not make distributions without D&G's consent; that the beneficiaries and trusts shared investment advisors, with the effect that the beneficiaries could direct the trusts' investment activity; the tax-reduction scheme concerning the trusts was, on the facts, under D&G's direction; and there was virtually no documentation that the trustee took an active role in managing the trusts or dealing with the trusts' affairs (except for execution of agreements, accounting and tax affairs).

The court also took into account the fact that D&G were able, in effect, to replace the trustee at any time. D&G could ask the protector to replace the trustee and if the protector was not compliant, the protector could be replaced. There seemed to be no evidence that the protector thought his role was other than to assist D&G control their trusts. It was suggested that D&G took little interest in the trustee and who was involved with their trusts, but the court held that if the trustee had a substantive role to play in managing the trusts, D&G should be interested in what the trustee was doing and in ensuring that the persons involved were competent to manage the trusts.

The court concluded that there was no evidence that the trustee had not agreed to assume a limited role in the management of the trusts and the central management and control of both trusts was in Canada, namely with D&G, with the result that trusts were also Canadian resident.

What factors may identify the key players who determine the location of management and control for a trust?

  • Consideration of anything that limits a trustee's role in trust management, and whether a trustee apparently assumes a limited role in the management of trusts, indicating that other persons or entities have the key and/or material role in management.
  • The power of particular persons to replace the trustee and the fact that a protector acts in a way that suggests that he deems his role primarily to assist persons who may hire and fire the trustees.
  • The level of interest in the trustees' activities by persons integrally linked to the creation of the structure.
  • The experience and expertise of the trustee in undertaking transactions for the trust, for example, undertaking proper due diligence, and the question of who actually has that expertise.
  • The fact that a trust instrument limits trustee liability, for example to wilful neglect or default, which could mean there is no practical concern about legal liability, which begs the question as to where such liability would lie.

This decision of the Canadian court clearly highlights the well documented need to look behind the role of the trustee. It also adds to the range of factors and circumstances to consider when setting up and practically administering complex structures that include a trust, so that the question of residence of a trust as determined by how and where it is managed and controlled does not cause undue tax liability.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.