Principles of an earlier judicial ruling on another arrangement

The taxpayer was the settlor and a beneficiary of a trust that had been issued a follower notice and an accelerated payment notice in relation to gains made on the disposal of assets. He argued that the gains were exempt from UK capital gains tax under the UK/Mauritius double tax treaty. This was on the basis that the gains had been realised after trustees resident in Mauritius had replaced those in Jersey. HMRC decided the taxpayer had implemented a tax avoidance arrangement known as ‘round the world’ which had been ruled ineffective in Smallwood v CRC [2010] STC 2045.

The taxpayer sought judicial review saying the follower notice was not supported by the Smallwood decision.

Sir Ross Cranston in the High Court said the taxpayer had misunderstood the nature of Smallwood. It was not just a question of fact that the place of effective management of the trust was found to be the...