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LAERSTATE BV Decisions of the Board of Directors or not, as the case may be

October 12, 2009

Arun Birla and David Mallett

In one of the more important cases of 2009, the UK First-Tier Tribunal (the "Tribunal") held that whilst Laerstate BV was a company incorporated in the Netherlands it was resident for tax purposes within the UK because one of its two directors ("Person A") was deemed to have made decisions concerning the companys policy, strategy and management predominantly from within the UK.


Laerstate BV was acquired by Person A, who subsequently became a director in 1992, resigning in 1996. Laerstate BV had one other director ("Director B"), who was based continuously in the Netherlands. During the course of its business activities Laerstate BV made arrangements to subscribe for certain shares in Lonrho plc, which were later disposed of, following Person As resignation as a director. Laerstate BV sought relief under the 1980 UK-Netherlands tax treaty in respect of dividends received from Lonrho plc, claiming repayment of over £2 million in tax credits. The Inland Revenue assessed Laerstate BV with regards to both corporation tax in respect of the gain arising on the disposal of the shares and advance corporation tax, an assessment that Laerstate BV contested on the basis that it was not resident in the UK at the relevant times and, therefore, not subject to UK tax.

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