[2024] UKUT 00319 (TCC)

Mr Panayi was born in Cyprus. He moved to the UK as a child in the late 1940s. He lived and worked in the UK after that date until he returned to Cyprus as set out below. Mr Panayi had never acquired a UK domicile.

In 1992 Mr Panayi established four settlements for the benefit of his children and other members of his family. He transferred into the trusts some of the shares which he owned in Cambos Enterprises Ltd (“Cambos”). Mr Panayi and a UK trust company were the original trustees. Later Mrs Panayi was added as a trustee. The four trusts were accumulation and maintenance trusts and the Trustees of those settlements are the Appellants in this appeal.

Early in 2004 Mr and Mrs Panayi decided they wished to return to live in Cyprus. To that end, amongst other things, on 19 August 2004 Mr and Mrs Panayi resigned as trustees of the four trusts; in their place three individuals resident in Cyprus were appointed as trustees. The UK resident trust company remained as a trustee; but the effect was that three out of the four trustees were then non-UK resident.

The following month, Mrs Panayi moved back to Cyprus with their youngest child. Mr Panayi moved there in early 2005.

On 19 December 2005 the Trustees sold the shares in Cambos. The sale took place after the migration of the trusts but before the due date for payment of any capital gains tax arising under s80 TCGA.

The value of the Cambos shares at the time the majority of the Trustees ceased to be resident in the UK has been agreed by the parties at about £30 million. After indexation and taper relief, it is agreed that the tax in dispute amounts to £332,952 plus interest (£83,128 plus interest per trust).

While the facts relating to the change in the Trustees’ residence and the disposal of the shares were given to HMRC in the Trustees’ self-assessment returns for 2004/5, the returns did not include a self-assessment of any liability under s80 TCGA.

In January 2007 HMRC opened enquiries into the Trustees’ tax returns. On 29 September 2010 HMRC issued closure notices to the Trustees, assessing tax on the basis that there was a liability under s80 TCGA.