Reference for a preliminary ruling from Upper Tribunal (Tax and Chancery Chamber) (United Kingdom) made on 30 December 2020 — Gallaher Limited v The Commissioners for Her Majesty's Revenue & Customs

(Case C-707/20)

(2021/C 110/21)

Language of the case: English

Referring court

Upper Tribunal (Tax and Chancery Chamber)

Parties to the main proceedings

Applicant: Gallaher Limited

Defendant: The Commissioners for Her Majesty's Revenue & Customs

Questions referred

1.	Whether Article 63 TFEU can be relied upon in relation to domestic legislation such as the Group Transfer Rules, which applies only to groups of companies?

Even if Article 63 TFEU cannot more generally be relied upon in relation to the Group Transfer Rules, can it nonetheless be relied upon:

a)	in relation to movements of capital from a parent company resident in an EU member state to a Swiss resident subsidiary, where the parent company has 100 % shareholdings in both the Swiss resident subsidiary and the UK resident subsidiary on which the tax charge is imposed?

b)	in relation to a movement of capital by a wholly-owned subsidiary resident in the UK to a wholly-owned Swiss resident subsidiary of the same parent company resident in an EU member state, given that the two companies are sister companies and not in a parent-subsidiary relationship?

Whether legislation, such as the Group Transfer Rules, which imposes an immediate tax charge on a transfer of assets from a UK resident company to a sister company which is resident in Switzerland (and does not carry on a trade in the UK through a permanent establishment), where both of those companies are wholly-owned subsidiaries of a common parent company, which is resident in another member state, in circumstances where such a transfer would be made on a tax neutral basis if the sister company were also resident in the UK (or carried on a trade in the UK through a permanent establishment), constitutes a restriction on the freedom of establishment of the parent company in Article 49 TFEU or, if relevant, a restriction on the freedom to move capital in Article 63 TFEU?

Assuming Article 63 TFEU can be relied upon:

a)	was the transfer of the Brands and related assets by GL to JTISA, for a consideration which was intended to reflect the market value of the Brands, a movement of capital for the purposes of Article 63 TFEU?

b)	did the movements of capital by JTIH to JTISA, its Swiss resident subsidiary, constitute direct investments for the purposes of Article 64 TFEU?

given that Article 64 TFEU only applies to certain types of capital movement, can Article 64 apply in circumstances where movements of capital can be characterized as both direct investments (which are referred to in Article 64 TFEU) and also as another type of capital movement not referred to in Article 64 TFEU?

If there was a restriction then, it being common ground that the restriction was in principle justified on overriding grounds in the public interest (namely, the need to preserve the balanced allocation of taxing rights), was the restriction necessary and proportionate within the meaning of the case law of the CJEU, in particular in circumstances in which the taxpayer in question has realized proceeds for the disposal of the asset equal to the full market value of the asset?

If there was a breach of the freedom of establishment and/or of the right to free movement of capital:

a)	does EU law require that the domestic legislation be interpreted or disapplied in a manner which provides GL with an option to defer the payment of tax;

if so does EU law require that the domestic legislation be interpreted or disapplied in a manner which provides GL with an option to defer the payment of tax until the assets are disposed of outside the sub-group of which the company resident in the other Member State is parent (i.e. ‘on a realization basis’) or is an option to pay tax in instalments (i.e. ‘on an instalment basis’) capable of providing a proportionate remedy;

if, in principle, an option to pay tax by instalments is capable of being a proportionate remedy:

is that only the case if domestic law contained the option at the time of the disposals of assets, or is it compatible with EU law for such an option to be provided by way of remedy after the event (namely for the national court to provide such an option after the event by applying a conforming construction or disapplying the legislation);

ii)	does EU law require national courts to provide a remedy which interferes with the relevant EU law freedom to the least possible extent, or is it sufficient for the national courts to provide a remedy which, whilst proportionate, departs from the existing national law to the minimum extent possible;

iii)	what period of instalments is necessary; and

iv)	is a remedy involving an instalment plan in which payments fall due prior to the date on which the issues between the parties are finally determined in breach of EU law, i.e. must the instalment due dates be prospective?