Place of effective management of the trusts was the UK

The taxpayers appealed against amendments made by HMRC to their 2000-01 tax returns whereby HMRC imposed capital gains tax on the gains which arose on the disposals of shares in TeleWork Group plc made by the trustees of three family trusts.

The First-tier Tribunal had to consider the tie breaker in the UK-Mauritius double tax treaty to determine where the trusts were resident. They were for a short period resident in Mauritius when the share disposal took place in August 2000 but they were also resident in the UK during the same tax year because the Mauritius resident trustees were replaced with UK tax resident trustees shortly in October 2000. The planning is known as a ‘round the world scheme’ and was found to have failed by the Court of Appeal in CRC v Smallwood and another [2010] STC 2045.

The First-tier Tribunal found there was a period when each...