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The taxpayer a UK citizen was the marketing director a US time-share company owned by a married couple.
The couple divorced in 1989 and the ex-wife became the sole owner of the company. In 1994 the taxpayer resigned and received no compensation.
Two years later the ex-wife sold her company and gave the taxpayer $2m by personal cheque. He had no prior knowledge of the payment which she said was ‘in recognition of his contribution and dedication to the company and our friendship’.
The taxpayer believed the money was a gift and not subject to tax. He put it in an Isle of Man bank account believing the interest payments would not attract tax and did not report the cheque or interest on his UK tax returns.
In 2006 HMRC obtained information from banks concerning offshore deposit accounts; the taxpayer’s Isle...
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