Management of trust

Round-the-world scheme fails

The taxpayers used the ‘round-the-world scheme’ to mitigate their capital gains tax. They did ‘not formally’ concede that the arrangements had a tax avoidance purpose but did not ‘seriously challenge the proposition’.

Under the scheme shares held in an offshore trust became pregnant with gain and were migrated to a low-tax or no-tax jurisdiction here Mauritius with which the UK had a double taxation treaty. The gain was realised and suffered no tax because the alleged effect of the treaty was to confer the right to charge capital gains tax on Mauritius which did not levy such a tax. The trust was later transferred to the UK where the proceeds of sale could be used free of UK tax.

HMRC did not agree with this result and assessed them to capital gains tax. The taxpayers appealed.

The main issue for the First-tier Tribunal...