James Albert McLaughlin v The Commissioners Her Majesty's Revenue & Customs, TC 01870
| Jurisdiction | UK Non-devolved |
| Judge | Adrian J SHIPWRIGHT |
| Judgment Date | 06 March 2012 |
| Neutral Citation | [2012] UKFTT 174 (TC) |
| Respondent | The Commissioners Her Majesty's Revenue & Customs |
| Appellant | James Albert McLaughlin |
| Reference | TC 01870 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 174 (TC)
TC01870
Appeal number TC/2009/16852
CAPITAL GAINS TAX - ss 60 and 71 TCGA- Was beneficiary to whom
appointment made absolutely entitled? Yes as a matter of general law - Did
artificiality mean it did not signify for tax purposes? No – Appeal allowed
FIRST-TIER TRIBUNAL
TAX
JAMES ALBERT MCLAUGHLIN Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Respondents
TRIBUNAL: ADRIAN SHIPWRIGHT (TRIBUNAL JUDGE)
TOBY SIMON (TRIBUNAL MEMBER)
Sitting in public at 45 Bedford Square, London WC1 on 12, 13 and 14 October 2011
Kevin Prosser QC and Jonathan Bremner, counsel, instructed by KPMG for the
Appellant
Adam Tolley, counsel, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
© CROWN COPYRIGHT 2012
2
DECISION
Introduction
1. This is an appeal by James Albert McLaughlin (“the Taxpayer”) against the
conclusion of the Respondents (“HMRC”) stated in a closure notice dated 28 5 October 2008, closing an enquiry into the Taxpayer’s return for the tax year 2002-
03.
2. HMRC concluded that, in the circumstances described below, there was a
disposal by the trustees of a settlement rather than by a non-UK domiciled
individual with a consequent UK capital gains tax charge on the Taxpayer as 10 explained below. The effect of the amendment to reflect this conclusion was that
an extra £2,863.25 was to be paid by the Taxpayer after Taper Relief had been
applied.
The Issue
3. The essential issue in this case is whether section 71(1) of the Taxation of 15 Chargeable Gains Act 1992 (“TCGA”) applied to an appointment (“the
Appointment”) made on 6 March 2003 by the trustees of the James Albert
McLaughlin 2003 Settlement (“the Settlement”) in favour of a person who had
been added as a beneficiary of the Settlement, Mr Adrian Gower (“AG”).
4. The Appointment related to part of the trust fund containing certain loan notes 20 (“the Loan Notes”). The Loan Notes are considered in more detail below.
Common Ground
5. It was common ground between the Parties that if:
(a) as the Taxpayer contended, section 71(1) applied to the Appointment the Loan
Notes became vested in AG, so that the disposal of the Loan Notes on 7 March 25 2003, was a disposal by AG and as he was non-UK domiciled, and the Loan
Notes were situated outside the UK, no capital gains tax was payable on the
disposal (assuming no remittance etc.); or
(b) as HMRC contend, section 71(1) did not apply to the Appointment, then the
Loan Notes continued to be vested in the trustees, and so the disposal on 7 March 30 2003 was by the trustees on which capital gains tax was in principle payable with
consequent changes to the sale consideration of a sale of the Loan Notes to the
trustees and so to the Taxpayer’s tax liability.
6. It was not disputed that there was a disposal of the Loan Notes on 7 March
2003. It was also common ground that the Loan Notes, being “non qualifying 35 corporate bonds” were assets for the purposes of capital gains tax so that gains
arising on the disposal of the Loan Notes could be chargeable gains. The dispute
was as to who was the disponor, AG or the trustees.
7. It was also common ground that “… the various steps taken by the trustee were
taken as Part of a plan to avoid tax and thereby benefit [the Taxpayer], a 40 beneficiary of the trust”.
8. There was no suggestion that the documents were shams nor that the trustees
acted improperly. Counsel for HMRC very properly disclaimed any suggestion of
sham or impropriety.
9. The Taxpayer accepted that no-one contemplated AG would give the trustees 45 any direction at all in relation to the Loan Notes.
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