JHA | Exit Charge on Trust Migration (P Panayi Settlements)

Trustees of the P Panayi Accumulation & Maintenance Settlements: Exit Charge on Trust Migration

September 28, 2017


Trustees of the P Panayi Accumulation & Maintenance Settlements C-646/15

This case deals with s.80 TCGA 1992 which provides that the migration of a trust resulting from trustees ceasing to be UK resident is a deemed disposal for capital gains tax purposes of the trust fund at market value. The FTT referred the case to CJEU for a preliminary ruling on whether the exit charge on trust migration is compatible with the freedom of establishment, freedom to provide services and free movement of capital.

The ECJ found a difference in treatment between trusts which retain their place of management in the UK and trusts whose place of management is transferred to another Member State. The ECJ held that the legislation discourages the trustees, who manage the trust, from transferring the place of management of the trust to another Member State and deters the settlor from appointing new non-resident trustees. This difference constitutes, according to the Court, a restriction on freedom of establishment.

Moreover, as the legislation at issue provides only for the immediate payment of the tax concerned, it goes beyond what is necessary to achieve the objective of preserving the allocation of powers of taxation between Member States and constitutes, therefore, an unjustified restriction on the freedom of establishment.


This article appears in the JHA September 2017 Tax Newsletter, which also features:

  1. The draft Finance Bill (No.2) – Partial Closure Notices
  2. First ever GAAR Advisory Panel Opinion
  3. Beneficial Ownership Limitations must target only artificial arrangements
  4. The Trustees of the BT Pension Scheme C-628/15: Tax Credits for Exempt Taxpayers
  5. Cussens & Others C-251/16: Abuse of Rights

You can download the whole newsletter as a PDF: September 2017 – Newsletter