## Facts

- Daily Mail and General Trust plc (“Daily Mail”) was incorporated under UK law and had its registered office in the United Kingdom.
- Under UK tax rules then in force, a company was generally treated as UK-resident for corporation tax if its “central management and control” was exercised in the UK.
- Daily Mail planned to transfer its central management and control to the Netherlands while remaining a UK-incorporated company.
- The proposed move was connected to tax planning for transactions involving significant assets and the intended use of proceeds (including purchasing its own shares), aiming to avoid an immediate UK corporation tax charge that could arise if the company remained UK-resident during the transactions.
- UK law permitted a UK-incorporated company to move its central management and control abroad, but it could not cease to be UK-resident for tax purposes without Treasury consent.
- HM Treasury did not grant consent on the terms sought by Daily Mail, and the company brought judicial review proceedings against HM Treasury and the Commissioners of Inland Revenue.
- The High Court of Justice (Queen’s Bench Division) referred questions to the Court of Justice for a preliminary ruling under Article 177 EEC (now Article 267 TFEU).
- The reference asked, in substance, whether the freedom of establishment provisions (Articles 52 and 58 EEC) and Council Directive 73/148/EEC required the UK to allow Daily Mail to move its central management and control to another Member State while keeping its UK incorporation.

## Issues

1. Whether Articles 52 and 58 EEC conferred on a company incorporated under the law of a Member State, and having its registered office there, a right to transfer its central management and control to another Member State while retaining its legal status under the law of incorporation.
2. Whether Council Directive 73/148/EEC (on movement and residence in connection with establishment and services) applied, or could be applied by analogy, to give companies such a right.

## Decision

- The Court held that, in the then state of Community law, Articles 52 and 58 EEC did not confer on a company incorporated in a Member State any right to transfer its central management and control to another Member State while retaining its status under the law of the incorporating State.
- The Court held that Directive 73/148/EEC concerned movement and residence of natural persons and could not, by its nature, be applied by analogy to legal persons; it therefore conferred no such right on companies.
- Accordingly, the Treaty freedom of establishment provisions and Directive 73/148 did not prevent the UK from requiring Treasury consent before a company could cease to be UK-resident for tax purposes by moving its central management and control abroad.

## Legal Principles

- Companies are “creatures of the law” and, in the absence of EU harmonization, their existence and functioning depend on national rules on incorporation and corporate connecting factors.
- Member States’ laws differ significantly on what connection to national territory is required for a company (registered office, central administration/real seat, or both) and on whether that connection may later be changed without loss of legal personality.
- The Treaty rules on establishment do not, by themselves, resolve the consequences of transferring a company’s real head office/central management and control out of the incorporating State; those matters were left to future EU measures or conventions.
- Freedom of establishment protects cross-border establishment in other Member States, but it does not necessarily give a company a Treaty right, against its home Member State, to move its central management and control abroad while remaining governed by the original incorporation law.
- Directive 73/148/EEC is limited to natural persons; it cannot be extended to companies to create corporate mobility rights not found in the Treaty.

## Conclusion

The Court of Justice ruled that, given the then state of Community law, Articles 52 and 58 EEC did not give a UK-incorporated company a right to move its central management and control to another Member State while remaining a UK company, and Directive 73/148/EEC applied only to natural persons; therefore, EU law did not bar the UK from conditioning the loss of UK tax residence on Treasury consent.


Case 81/87, The Queen v. H.M. Treasury & Comm’rs of Inland Revenue ex parte Daily Mail & Gen. Tr. PLC, 1988 E.C.R. 5483 (Ct. J.)