Pevex Accounting Services Ltd.

Accounting, Payroll & Structuring Services

Copyright © 2012 - 2015  Pevex Accounting Services Ltd. Registered in the UK No 8190796, HMRC MLR No 12691270                                                                                    

Pevex Accounting

Group  of Companies

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- some examples -

Consultancy & structuring services

Management & control

What is “management & control,” and why is it important?


In essence, it means where the decisions of the company are taken, and by whom, This is of crucial importance especially where the company is “visible” in the country of residence of the owners.


In a landmark case dating back to 1906: Lord Loreburn (in De Beers Consolidated Mines Ltd v Howe 5TC198) said:


" . . . the real business is carried on where the central management and control actually abides. It remains to be considered whether the present case falls within that rule. This is a pure question of fact, to be determined, not according to the construction of this or that regulation or by-law, but upon a scrutiny of the course of business and trading”.


And 90 years later in in 1996: - Untelrab Ltd v McGregor (Inspector of Taxes) ; Unigate Guernsey Ltd v McGregor (Inspector of Taxes) ; Unigate Overseas Ltd v McGregor (Inspector of Taxes). It was held that –


 (1) The burden of proving residence lay on the Revenue. If they failed to establish that the company's residence was within their jurisdiction then the company ought not to be taxed. (2) Although a board might do what it was told to do, it did not follow that the control and management lay with another, so long as the board exercised its discretion when coming to its decisions and would have refused to carry out an improper or unwise transaction.


Both cases centred on whether a business connected with a high tax jurisdiction but operated from a low tax area could or should be taxed in the high tax area (in these two cases, the UK).  Both were effectively decided on the question of “management & control”.   


It is not enough to set up a company in, say, Cyprus or Singapore and claim to be liable to those jurisdictions’ lower rates of tax if the decisions concerning the company are clearly taken elsewhere.


We can advise clients as to where and how management & control should be structured.






Over and over again courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant...

(United States Judge Learned Hand in Commissioner vs. Newman. 159 F.2d 848 (1947))

Using multiple structures

Why is it desirable to use multiple structures in some instances?


The two most common reasons are (a) privacy and (b) enhanced tax planning.  


Privacy - Most common-law based countries operate a registry system whereby the names (and addresses) of the owners (shareholders) are available for a small inspection fee (increasingly on-line as in Singapore, The UK, Hong Kong, New Zealand etc).  It is therefore quite common to register an IBC in one of the pure tax havens (eg Seychelles, BVI etc) and this IBC becomes the shareholder of the “low tax” company ensuring privacy.  It also can provide a conduit to receive dividends etc.  


Tax Planning - A number of countries offer very attractive holding company regimes, and it is often worth while incorporating such a jurisdiction into a structure.


We can assist in creating such structures both for reasons of privacy and tax planning.

Low tax vs. zero tax.

There are any number of jurisdictions offering “zero tax”, so why are “low tax” jurisdictions often recommended?  


Zero tax jurisdictions are targeted by many developed countries and, among other “measures”, find revenues due to companies of those jurisdictions subject to withholding taxes.  This makes them impractical for direct use in international trade.


Low tax jurisdictions by comparison are, generally, considered to be acceptable trading partners.  


Hong Kong for example levies corporate tax at 16.5% but operates territorial taxation meaning that transactions which do not pass through the territory may be fully tax exempt.  Singapore offers 3 years of zero tax on the first $80,000 profit and a general lower tax rate of 8.5% (up to $240,000 of profit).  Cyprus, currently with a 10% tax rate (but soon to rise to 12.5%) offers generous deductions reducing the effective rate to a much lower figure with planning.


We can advise and guide clients through this maze