McLaughlin v Revenue & Customs [2012] UKFTT 174 (TC) (06 March 2012)

McLaughlin v Revenue & Customs [2012] UKFTT 174 (TC) (06 March 2012)

The beneficiary (AG) became absolutely entitled as against the trustees to the loan notes as a matter of general law and for tax purposes, as the appointment vested the assets in him subject only to the trustees’ lien, which does not prevent absolute entitlement under section 60(2) TCGA. The artificiality of the scheme did not prevent the appointment from signifying for tax purposes. Therefore, the disposal was by AG, not the trustees, and no UK capital gains tax was chargeable on the disposal.

Citation
[2012] UKFTT 174
Parties
Appellant: James Albert McLaughlin; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
06 March 2012
Procedural Posture
Tax Appeal / First Tier Tribunal (tax), Decision on Appeal Against Closure Notice
Outcome
Appeal allowed
Legal Topics
Capital Gains Tax, Taxation of Chargeable Gains, Trust Beneficiary Entitlement, Tax Avoidance Schemes, Section 71 TCGA, Section 60 TCGA
Tax Law Trusts Law Capital Gains Tax Taxation of Chargeable Gains Trust Beneficiary Entitlement Tax Avoidance Schemes Section 71 TCGA Section 60 TCGA

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Parties

James Albert McLaughlin

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal (tax), Decision on Appeal Against Closure Notice

Legal Issues

  1. 1 Whether section 71(1) of the Taxation of Chargeable Gains Act 1992 applied to the appointment made by the trustees to a non-UK domiciled beneficiary
  2. 2 Whether the beneficiary became absolutely entitled as against the trustees for tax purposes
  3. 3 Whether the artificiality of the scheme prevented absolute entitlement from signifying for tax purposes

Ratio Decidendi

The beneficiary (AG) became absolutely entitled as against the trustees to the loan notes as a matter of general law and for tax purposes, as the appointment vested the assets in him subject only to the trustees’ lien, which does not prevent absolute entitlement under section 60(2) TCGA. The artificiality of the scheme did not prevent the appointment from signifying for tax purposes. Therefore, the disposal was by AG, not the trustees, and no UK capital gains tax was chargeable on the disposal.

Court Disposition

Appeal allowed

Orders

  • Closure notice amended to reflect that the disposal was by AG and not the trustees; no UK capital gains tax charge arises on the disposal of the loan notes.