Transfer of assets abroad on share sale

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

HMRC assessed the taxpayer on the dividends on the basis he had in effect transferred assets abroad – Mr C’s shares – and had the power to enjoy the income.

The First-tier Tribunal ruled that the taxpayer did not transfer the...