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Geoffrey Richard Haworth & Ors v The Commissioners for HMRC

[2024] UKUT 58 (TCC)
Taxpayers tried to avoid UK taxes using a complex scheme involving trusts in Mauritius. The court decided whether the trusts were truly managed from Mauritius or the UK. The court sided with the UK tax authority, finding that overall control remained in the UK despite a temporary move to Mauritius, meaning the taxpayers owed the taxes.

Key Facts

  • Appeal against First-tier Tribunal (FTT) decision dismissing appeals concerning capital gains tax avoidance using a 'round the world' scheme.
  • Scheme aimed to avoid CGT by establishing trusts' residence in Mauritius.
  • Effectiveness hinged on the trusts' place of effective management (POEM) being in Mauritius.
  • FTT found POEM to be in the UK, dismissing the appeals.
  • Appeal focused on whether the FTT applied the correct test for determining POEM.

Legal Principles

Test for identifying POEM of a trust.

HM Revenue and Customs v Smallwood [2010] EWCA Civ 778; Wood v Holden 78 TC 1

Residence of trusts for CGT purposes.

Taxation of Chargeable Gains Act 1992 (TCGA 1992), sections 2, 69, 77, 78, 277; Income and Corporation Taxes Act 1988, Part XVIII

UK/Mauritius Double Taxation Treaty, Article 4(3) (POEM as tie-breaker for residence).

Double Taxation Relief (Taxes on Income) Mauritius Order 1981/1121

Test for central management and control (CMC) of a company; relationship to POEM.

Wood v Holden 78 TC 1

Usurpation of decision-making functions.

Wood v Holden 78 TC 1; Smallwood

Outcomes

Appeal dismissed.

The Upper Tribunal (UT) found the FTT applied the correct test for POEM, based on the approach in Smallwood, not Wood v Holden. The UT held the FTT’s factual findings supported its conclusion that the trusts’ POEM was in the UK.

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