Place of effective management was the UK

The trustees of a settlement appealed against a closure notice issued by HMRC. The notice amended the trustees’ 2002-03 self assessment to bring into charge capital gains of about £2.9m which arose on the liquidation of a company incorporated in the Isle of Man and wholly owned by the trust.

The trust had been set up in 1990 on the Isle of Man with trustees also resident in the Isle of Man. In July 2002 the Isle of Man trustee retired in favour of a Mauritian trustee who in turn retired in March 2003 in favour of UK trustees - Mr Wesley Mrs Mackay (whose appointment was subsequently set aside) and a corporate trustee.

The issue considered the efficacy of a 'round the world scheme' used by trustees to avoid taxation on gains in the UK. The scheme relied on the trust being resident in Mauritius under the...