P Panayi Accumulation & Maintenance Settlements v HMRC
 C-646/15

WTLR Issue: Winter 2018 #170

TRUSTEES OF THE P PANAYI ACCUMULATION & MAINTENANCE SETTLEMENTS

V

COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS


Analysis

In 1992 a Cypriot national, Panico Panayi, settled 40% of the shares of Cambos Enterprises Limited on the trusts of four Settlements for the benefit of his children and other family members. At the time the trusts were created, both the settlor and the trustees were resident in the United Kingdom. Subsequently, the settlor and his wife decided to return to Cyprus. On 19 August 2004 new trustees were appointed, all resident in Cyprus. As a result, a majority of the trustees ceased to be resident in the United Kingdom. When the trustees filed tax returns for the year 2004/2005, they failed to include self-assessments to a liability under s80 of the Taxation of Chargeable Gains Act 1992 (‘TCGA’). HMRC opened enquiries and, in September 2010, issued a decision to the trustees, reassessing tax on the basis that there had been a charge triggered by the appointment of new trustees, since a majority of them had ceased to be resident in the United Kingdom and, consequently, the administration of the trusts was to be deemed to have moved to Cyprus in the tax year 2004/2005. The trustees brought proceedings before the First-tier Tribunal (Tax Chamber), challenging the compatibility of the taxation, and its immediate payment, with the fundamental freedoms of movement provided for under the law of the European Union. HMRC considered that none of those freedoms of movement were applicable because of the status of a trust under the law of England and Wales and, if any of them were held to be applicable, whilst it accepted that immediate payment of the taxation would constitute a priori a restriction, it was one that would however be justified and proportionate. The First-tier Tribunal (Tax Chamber) referred questions for a preliminary ruling – whether the provisions of the FEU Treaty relating to freedom of establishment preclude, in circumstances where trustees, under national law, are treated as a single and continuing body of persons, legislation of a Member State providing for the taxation of unrealised gains in the value of assets held in trust when the majority of the trustees transfer their residence to another Member State, and fails to permit deferred payment of the tax due.


Cases referenced

Cases in bold have further reading - click to view.

  • Commission v Belgium C-47/08; EU:C:2011:334
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  • Commission v Hungary C-392/15; EU:C:2017:73
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  • Daily Mail and General Trust C81/87; EU:C:1988:456
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  • DMC C-164/12; EU:C:2014:20
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  • Gebhard C-55/94; EU:C:1995:411
  • (

  • National Grid Indus C-371/10; EU:C:2011:785
  • (

  • Reyners C-2/74; EU:C:1974:68

  • (

  • Timac Agro Deutschland C-388/14; EU:C:2015:829
  • (

  • Verder LabTec C-657/13; EU:C:2015:331
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Legislation referenced

Legislation in bold has further reading - click to view.

  • Taxation of Chargeable Gains Act 1992, ss 2, 69, 80, 87, 91