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.