‘Round the world’ avoidance schemes were held not to be effective in this case, as the ‘place of effective management’ of the overseas trusts was held on the evidence to be in the UK, and the gains were therefore liable to UK capital gains tax.
The appellants appealed against closure notices by which HM Revenue and Customs (HMRC) amended their tax returns for 2002/03 to charge capital gains tax (CGT). The underlying dispute between the parties related to the efficacy of a tax avoidance scheme (known as the ‘round the world scheme’), which the appellants used in order to avoid UK tax on their gains.
Under the scheme, assets held within an offshore trust became pregnant with gain and were migrated to a low-tax or no-tax jurisdiction (in this case Mauritius), with which the UK has a double taxation arrangement (DTA). The gain was realised; and because the intended effect of the DTA was to confer
