Location of decision making

The taxpayer H is a successful motor rally driver. He was mentored by RD who recognised his talent early on. He and RD subsequently signed a partnership agreement the plan being to combine RD’s management and commercial experience with H’s driving skills.

Both the taxpayer and RD are domiciled outside the UK in the Isle of Man. The partnership’s income is a mixture of UK and non-UK sources.

HMRC argued that the taxpayer’s share of the non-UK profits should be taxed on him as they arise as the partnership is controlled and managed inside the UK. The partnership claimed that the control and management was outside the UK and therefore the remittance basis applied to the taxpayer’s non-UK income.

The Revenue said that the partnership was an artificial structure formed to obtain a tax advantage.