Transfer of assets abroad by non-domiciled taxpayer resident in the UK

The taxpayer was a non-domiciled UK tax resident in 2005-06 and 2006-07. He owned half the issued share company in Argo Capital Management Ltd and wished to buy out his co-owner Mr C. To facilitate this he bought a shelf company (Farkland) which was incorporated in the British Virgin Islands. The company was then transferred to Rialco the taxpayer’s family trust which was governed by Cyprus law. Mr C transferred his shares in Argo to Farkland which financed its acquisition with a loan. After the sale of the shares Argo paid interim dividends to Farkland. The taxpayer and Farkland then sold Argo to a UK listed company.

HMRC assessed the taxpayer to tax on the interim dividends on the basis he had transferred assets abroad and he had the power to enjoy that income.

The taxpayer appealed.

The First-tier...