The Felixstowe Dock and Railway Company Limited and Others

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30 January 2012

The recent case of Felixstowe Dock and Railway Company Limited v Others [2011] UKFTT 838 provides commentary on the availability of group relief to several companies, in respect of losses made by a UK company through an intermediate Luxembourg holding company.


The Hutchison Whampoa group was a worldwide group of companies headed by Hutchison Whamppoa Limited, a company resident for tax purposes in Hong Kong.  The referral to the Tribunal arose out of claims for group relief by the relevant Hutchison Whampoa companies ("the Applicants") in respect of losses made by one member of the group, Hutchison 3G UK Limited ("the Surrendering Company").

At the relevant time, the Surrendering Company was owned by a consortium of companies through an intermediate Luxembourg holding company.  Relief had been claimed under s.406 of the Income and Corporation Taxes Act ("ICTA") 1988 (claims relating to losses etc... of consortium company or group member), but was deemed to be unavailable by HMRC.

In order for s.406 relief to be available there must exist a "link company" which is both a member of the consortium and a member of the group of companies.

In this case, the Applicants stated that the Luxembourg company was the "link company" on the basis that it was a member of the consortium owning, through an intermediate UK resident holding company, the Surrendering Company, and was in addition a member of a group of companies which included the Applicants.

Entitlement to group relief under s.406 is also not available unless the claiming company is resident in the UK or is a non-resident company carrying on a trade in the UK through a permanent establishment.  The Luxembourg company did not obviously satisfy this criteria.

It was argued by the Applicants that such a requirement is inconsistent with European Union law, and it could not be applied against the Applicants as it would be contrary to the provisions under the UK/Luxembourg double tax treaty.


The questions therefore referred to the Tribunal were:

  1. is the requirement for a link company to be resident in the UK or carrying on a trade in the UK through a permanent establishment, an infringe of the EU law rights of any company in the Hutchison Whampoa group?;
  2. to what extent do the provisions (Article 26) of the UK/Luxembourg double taxation convention impact upon the Applicants' claim for group relief?; and
  3. what is the impact, if any, of the anti-avoidance section, s.410 ICTA, on the application for group relief?

The Tribunal decided to refer the EU law question to the ECJ as they felt that they could not answer it with complete confidence.

In answer to question 2, by reason of its inability to surrender losses to the Applicants, the Surrendering Company was subjected to "any taxation or other requirement connected therewith" within the meaning of the double tax treaty.  That inability to surrender losses arose solely on the ground that the Surrendering Company was indirectly owned by a company which was resident in Luxembourg and not resident in the UK.  However, provisions in ICTA (s.788) had the effect of allowing the Applicants to obtain relief for losses surrendered by the Surrendering Company: it was the only way to give effect to the non-discrimination commitment in Article 26 of the double tax treaty.

S.410 ICTA is an anti-avoidance section which has the effect of precluding group relief in certain circumstances if specified "arrangements" exist.  HMRC argued that such arrangements did exist from November 2003 until June 2005 in relation to a sale and purchase agreement entered into by Hutchison Whampoa Limited.  The Tribunal judged however, that the effect of s.410 ICTA was to treat the Surrendering Company as not being party to such arrangements as outlined by the Revenue.


It will be interesting to await the ECJ's judgment on the impact of s.406 ICTA on the EU law rights of a non-UK company claiming group relief in relation to losses.  The judgment will no doubt impact on the consideration given to corporate structuring regarding the availability of group relief for losses.

If you have any questions, please contact Nigel Popplewell by e-mail on or Natalie Stoter on in the Corporate tax team.  

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