P Panayi Accumulation & Maintenance Settlements v Commissioners for Her Majesty’s Revenue and Customs (Case C-646/15)

March 2, 2016

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Preliminary Reference to the CJEU Capital Gains Tax on Unrealised Gains

By Jivaan Bennett

This case concerns the charge to Capital Gains Tax (CGT) on trustees migrating from the UK to Cyprus. The Taxation of Chargeable Gains Act 1992, s.80 provides for a charge to CGT to arise on the unrealised appreciation in value of trust property if the trustees of a settlement become at any time neither resident nor ordinarily resident in the UK. In effect, this creates an exit charge upon the relocation of trustees outside the UK.

The FTT has made a preliminary reference to the CJEU on the compatibility of the Taxation of Chargeable Gains Act 1992, s. 80 with the freedoms of establishment and the provision of services as well as the free movement of capital. The compatibility of this CGT legislation with the CJEU’s jurisprudence on exit taxation is also in question. The outcome of this case is likely to have considerable consequences for estate planning.

This article appears in the JHA March 2016 Tax Newsletter, which also features:

  1. Budget 2016 by Steve Bousher
  2. BPP Holdings v HMRC [2016] EWCA Civ 121 by Peter Stewart
  3. UBS AG and anor v Commissioners for HMRC [2016] UKSC 13 by Peter Stewart
  4. The Dutch Presidency of the Council presents its EU-BEPS Roadmap by Jivaan Bennett

You can download the complete newsletter as a PDF here: March 2016 – Tax Newsletter