9 Eur. L. Rep. 1 (2005)

handle is hein.journals/eurlawreo9 and id is 1 raw text is: [2005] EuLR

Special Commissioners
Dr John F Avery Jones
17 March 2004
B    EC law - Appropriate rate of corporation tax for small companies - Whether
inclusion of non-resident associated companies in computation was discriminatory
or constituted unlawful restriction on freedom of establishment - Marginal
small companies relief- Income and Corporation Taxes Act 1988, s. 13
C   Jansen Nielsen Pilkes Limited (Pilkes) (the appellant), a private limited
company concerned in the importation and sale of timber, appealed against
amendments made in May 2000 by Mr Ian Tomlinson, an Inland Revenue tax
inspector (the respondent). The contested amendments related to Pilkes'
corporation tax self-assessments for the accounting periods ending 31 December
2000 and 2001 (the accounting periods). Although registered in England and
Wales and resident in the United Kingdom, Pilkes' parent company, Jansen
D   Nielsen Pilkes Ltd (Pilkes BY), was both registered and resident in the
Netherlands, where it was liable for corporation tax. Since Pilkes BV was not
resident in the United Kingdom and did not trade through a UK branch or
agency, it was not within the charge to corporation tax under the Income and
Corporation Taxes Act 1988 (ICTA 1988), s. 11(1).
In addition to its majority shareholding in Pilkes, Pilkes BV also owned shares
in a number of non-UK-resident trading companies during the relevant account-
E  ing periods. During the first accounting period Pilkes had only two associated
companies, namely its parent Pilkes BV and one other associated company.
During the second accounting period Pilkes had six associated companies. Despite
the fact that none of these other companies was liable to corporation tax, the
Revenue had nevertheless restricted Pilkes' relief from corporation tax under
ICTA 1988, s. 13 for each of the accounting periods on the grounds that it had
associated companies. The amended assessments took into account Pilkes'
F   non-resident associates for the purposes of calculating marginal small companies'
relief pursuant to ICTA 1988, s. 13(3) and (4), and the effect of the Revenue's
restriction on Pilkes' corporation tax relief was to increase its tax assessment for
the first and second accounting periods by E161,127 and E22,288.58 respectively.
Pilkes contended that the application of s. 13 to groups of companies involv-
ing non-resident associated companies resulted in unlawful discrimination on
the basis of nationality and contravened its right to freedom of establishment,
G   contrary to Arts 43 and 48 of the EC Treaty. Pilkes accepted that s. 13 did not
result in direct discrimination on the basis of nationality but cited Case C-279/93
Finanzamt Koln-Altstadt v Schumacker [1995] ECR 1-225 for its contention that

( 2005 Hart Publishing Ltd.
CCC 1091-3297/05/010001-14

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