Avoidance scheme succeeds

The taxpayer was UK resident and domiciled and had realised a substantial gain on the sale of a business. He did not dispute that he had entered into a scheme to avoid capital gains tax by ensuring the gain was realised by a non-domiciled beneficiary of a trust who did not remit it.

The transaction occurred in 2002 prior to the introduction of the remittance basis charge and the targeted anti-avoidance rules on chargeable gains.

The taxpayer exchanged shares standing at a gain for loan notes situated outside the UK and with a value of £1.18 million. He claimed TCGA 1992 s 135 should apply to hold over the gain on the paper-for-paper exchange. The loan notes were then sold to a trust for £900.

The sale was a ‘backstop’ in case the planning failed to ensure taper relief would...