"This means that the case is now settled," said Andrew Watt,
of Alvarez & Marsal – Taxand.
The importance of this
dispute lies in the use of the tiebreaker place of
effective management (POEM) test, which features in many double
tax treaties of the UK for determining the place of residence
of a trust or company.
In a split decision, the three judges of the Court of Appeal
ruled in July last year that the UK/Mauritius double tax treaty
did not provide protection from a UK capital gains tax charge
that should have been incurred by the trust after the disposal
Using a 'round-the-world’ scheme, Mr and Mrs
Smallwood claimed double taxation relief on the capital gain
from asset sales during a year when the trustees of their
family settlement were resident both in the UK and Mauritius,
and there was no capital gains liability in Mauritius.
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