Jurisdiction to waive interest

The taxpayers were members of the Scottish Equitable Personal Pension Scheme. They transferred the value of their pension funds to retirement annuity trust schemes established in Guernsey.

To be eligible to join the taxpayers had to become resident on the island; they acquired a lease of a property in Alderney part of the Bailiwick of Guernsey but never resided there.

The UK conditions for the transfer of the schemes required the taxpayers to move to Guernsey to take up employment but they had no intention of doing so. They were told by their advisers that the transfer conditions had been satisfied.

HMRC ruled that the transfer was in breach of the reciprocal agreement between the UK and Guernsey. The department assessed the taxpayers to tax under TA 1988 s 647 and imposed interest and penalties.

The First-tier Tribunal found the taxpayers had...