THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS v RAJ SEHGAL (1) SANJEEV MEHAN (2) [2024] UKUT 00074 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Adam Johnson,Judge Kevin Poole |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 25 March 2024 |
Neutral Citation: [2024] UKUT 00074 (TCC) Case Number: UT/2022/000154
UPPER TRIBUNAL
(Tax and Chancery Chamber) Rolls Building, Fetter Lane, London EC4A 1NL
Remittance of foreign gains – s 809L ITA 2007 – indemnity liability waived and UK inter-
company debt not pursued pursuant to payment by non-UK third party overseas in separate
transaction financed by taxpayers using proceeds of offshore chargeable gains – whether
service provided or money used in the UK – whether money or consideration for service were
or were derived from the gain – whether money used in UK was the gain – whether money that
was or was derived from chargeable gains was used outside the UK in respect of a relevant
debt
Heard on: 12-13 February 2024
Judgment date: 25 March 2024
Before
MR JUSTICE ADAM JOHNSON
JUDGE KEVIN POOLE
Between
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Appellants
and
RAJ SEHGAL (1)
SANJEEV MEHAN (2) Respondents
Representation:
For the Appellants: Christopher Stone and Bayo Randle, Counsel, instructed by the
General Counsel and Solicitor to His Majesty’s Revenue and Customs
For the Respondents: Michael Firth, Counsel, instructed by TT Law Solicitors
1
DECISION
INTRODUCTION
1. This appeal is concerned with whether the Respondents (UK resident but non-domiciled
individuals) should be liable on the remittance basis in respect of certain payments made by an
offshore company controlled by them to a third party offshore company, in consequence of
which, amongst other things, the Respondents were released from liability under an indemnity
they had given on a sale of shares in a UK company which they had previously controlled. The
liabilities under appeal are £606,480 each, imposed on the Respondents by closure notices
issued on 22 July 2020 in respect of the 2010-11 tax year.
2. The First-tier Tribunal (“the FTT”), in a clear and carefully reasoned decision released
on 31 August 2022 (“the FTT Decision”), decided that the Respondents were not so liable for
the reasons summarised below, and the Appellants (“HMRC”) now appeal to this Tribunal
against the FTT Decision. As the Respondents were the Appellants in the proceedings before
the FTT, for the sake of clarity we shall refer to them in this decision as “RS” and “SM”
respectively, or “the Taxpayers” collectively.
DOCUMENTS
3. We received, in electronic form, a hearing bundle of 1,292 pages, an authorities bundle
of 1,462 pages and a core bundle of 50 pages.
BACKGROUND
4. The FTT gave a summary of the background facts at [10] to [20] of the FTT Decision, as
follows:
10. The transactions giving rise to the disputed charge under s 809L ITA 2007
arose from the sale by the Appellants, two UK resident but non-domiciled
individuals, of a company in which they were the major shareholders in 2010.
11. On 25 February 2010, the Appellants entered into an arm’s length
agreement (the Share Purchase Agreement (“SPA”)) to sell their 31.5% (SM)
and 41.5% (RS) shares of Visage Group Ltd (“VGL”) to Centennial
(Luxembourg) Sarl (“Centennial”), a Luxembourg resident subsidiary of the
Li & Fung Group. The consideration was a mix of cash and loan notes issued
by the purchaser, some of which were to be issued on deferred and earn out
terms.
12. At the time of the sale, Internacionale Retail Ltd (“IR”), another company
indirectly beneficially owned by SM (38%) and RS (38%), owed Visage Ltd
(a subsidiary of VGL, “Visage”) approximately £6 million. IR was a
subsidiary of SKS1 Limited, a Jersey company. (“SKS”)
13. Clause 8.1(d)(i) of the SPA provided
“The Individual Sellers hereby covenant with and undertake to indemnify the
Purchaser fully on demand and to keep it indemnified against any and all
Losses incurred, suffered or sustained by them or asserted against it or any
member of the Group or any member of the Purchaser's Group, or any or all
of them arising out of any of the following:
[…] (d) (i) any failure by Internacionale Retail Limited to pay any amounts
owed by it to any member of the Group as at the Completion Date by the
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