Anne Concepta Moran v The Commissioners for HMRC [2025] UKFTT 540 (TC)

[2025] UKFTT 00540 (TC)

Case No TC09521

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 2-6 December 2024

Date Judgment date: 14 May 2025

By remote video hearing

Appeal references: TC/2021/10461

TC/2022/11625

INCOME TAX - Transfer of Assets Abroad - ITA 2007 ss 731-733 - Non-transferor receiving a benefit as the result of a relevant transaction - Whether the Appellant is liable to Income Tax arising from her rent-free occupation of a house settled in an offshore trust by her late husband? - Yes - Is the 'Motive Defence' available? - No

EUROPEAN UNION - Freedom of movement of capital - Does Article 63 TFEU operate as to exempt the Appellant from the charge? - No, because, on the available evidence, no movement of capital

QUANTUM - Is there any reason to vary the assessments and closure notices so as to charge something less than the full value of the Accommodation Benefit? - No

OUTCOME - Appeals dismissed

Before

TRIBUNAL JUDGE CHRISTOPHER MCNALL

Between

MRS ANNE CONCEPTA MORANAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Ben Elliott, of Counsel, instructed by Charles Russell Speechlys LLP for Appellant

Rebecca Murray, of Counsel, instructed by the Solicitor's Office and Legal Services, Reviews and Litigation, HM Revenue and Customs for Respondents

DECISION

Introduction

[1]These consolidated appeals are brought against a series of assessments and closure notices for the years 2012/13, 2013/14, 2014/15, 2015/16, 2017/18, 2018/19, and 2019/20, issued on various dates between 3 April 2017 and 12 April 2022. The overall sum in dispute (following statutory review) is stated as £163,414.

[2]The assessments and closure notices were issued on the basis that the Appellant is liable to Income Tax under sections 731-733 of the Income Tax Act 2007 ('ITA 2007') by virtue of receiving a benefit from living, rent-free, in a house known as 'Highlands' ('the Accommodation Benefit').

[3]For the reasons set out more fully below, I have decided to dismiss the appeals in their entirety.

The burden and standard of proof

[4]The Appellant bears the burden of showing (in relation to the Assessments) that they are wrong in principle or in amount and (in relation to the Closure Notices) that they are wrong. Where assessments are assessments made outside the statutory window, HMRC bears the burden of showing that the statutory pre-conditions for the making of an assessment (eg, a 'discovery') are present.

[5]The standard of proof is the normal civil standard; namely, the balance of probabilities, or, put another way, whether something is likelier than not.

[6]In assessing whether the parties have discharged their respective burdens, I take account of the entirety of the evidence, documentary, written and oral, giving appropriate weight.

[7]At the outset of this Decision, it is appropriate to make some observations about the evidence of the Appellant Mrs Moran. Even making due allowances for her age, her health, the passage of time between some of the earliest events being asked about (at least 20 years) and the unfamiliarity and rigour of being cross-examined (especially over a video-link, with it being clear that she found the experience challenging), her evidence of fact, even as to things which had taken place at the property, was very patchy and unreliable.

[8]Cross-examination exposed the unreliability of figures in her written evidence, because inconsistent with contemporary documents, leading to a significant difference between sums actually spent and said to have been spent. I did not find her denials - written and oral - of lack of knowledge of her late husband Vincent Moran's business affairs convincing. Nor did I find her denials of knowledge of one of the trusts - Castletown - convincing. She said that she had never heard of it - which she may genuinely have believed when giving her oral evidence to me, but there was evidence in the bundle - being emails from 2012, that she was copied into, which mentioned it.

[9]Nor was I convinced at her explanation that she had not disclosed the Watcher Loans, when engaged in a disclosure facility in 2015, because she was "not aware" she had to disclose the Accommodation Benefit, and that her state was one of "ignorance is bliss". She had heard of Blest, and she knew that someone else - "the trustees" - were making substantial payments in relation to Highlands.

[10]Perhaps she was not very curious as to anything else, and I certainly thought that she was telling some of the truth, as it seems to her, when she said "the further I kept from any finances, the better I was, the happier I was".

[11]Taking all this into account leads me to the point where I do not give weight to her evidence except where corroborated by contemporary documents.

[12]In Re B (Children) (Care Proceedings: Standard of Proof)

[2008] UKHL 35

, Lord Hoffmann gave the following binding guidance concerning the operation of the standard of proof when it comes to fact finding: "[2] If a legal rule requires a fact to be proved (a 'fact in issue') a judge or jury must decide whether or not it happened. There is no room for a finding that it might not have happened. The law operates a binary system in which the only values are zero and one. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened. If he does discharge it, a value of one is returned and the fact is treated as having happened."

the late Vincent moran

[13]The activities, motives and intentions of the Appellant's late husband, Mr Vincent Moran, feature very prominently in this appeal. For the purpose of ease of exposition, and without any disrespect, I propose to refer to him simply as 'Vincent'.

[14]Vincent was born in Ireland in 1948. He moved to the UK where he pursued a business career, beginning in the building industry, but which later diversified.

[15]Vincent and the Appellant were married in 1974. They had three children: Damian (born in 1980, and who has played a part in this appeal) and two daughters (born in 1984 and 1986).

[16]With effect from 30 September 1994 (and, hence, at the time of the events referred to below) Vincent was domiciled in Ireland, resident for tax purposes in Guernsey, and deemed domiciled (for IHT purposes) in the UK.

[17]Vincent was a keen yachtsman. He died in August 2002, aged 54, in a boating accident in St Tropez.

[18]His last will was dated 15 February 1999, and was admitted to probate on 20 September 2005. Alongside that will was a letter of wishes, dated 15 February 1991, in which Vincent said that he wanted his will trustees to ensure that Mrs Moran was adequately provided for, including being able to carry on living at the matrimonial home (Highlands) for life, as of right, or, depending on the trustees' discretion, until any remarriage.

[19]As a much later, 2010, internal memorandum by a solicitor, Mr Hogwood, at (what was then) Speechly Bircham records:(1) Vincent's affairs were not in any ordered state at the time of his death;

(2) No single advisor seems to have been informed by Vincent of the entire nature or structure of the Estate, or Vincent's various endeavours.

[20]The Estate and "various endeavours" were said to have included "an unwieldy offshore structure comprising a holding company chain (held through a Guernsey nominee) in the BVI, Dutch Antilles, Netherlands", which ultimately held various companies in Poland (some dormant, others involved in speculative building developments). It was noted that considerable sums had been invested through this structure, but there was no proper accounting system in place, and no paper trail for various of the transfers.

[21]At the time of his death, Vincent also had "assets" in France, the Isle of Man, England and Gibraltar; commercial premises (let to Homebase) in the UK; a significant shareholding in an illiquid small cap listed UK company; and a BVI company, held through a Guernsey nominee, which owned military helicopter spares stored by a business partner (with whom there was no written agreement) in South Africa.

The evidence of witnesses

[22]I read witness statements and heard oral evidence from the following:(1) The Appellant, Mrs Moran, whose witness statement was dated 11 September 2023;

(2) Her son, Damian Moran, dated 13 October 2023;

(3) Julie Kleis, a trustee of the Blest Trust and Castletown Trust, and an authorised signatory for Watcher and Nabib, dated 14 September 2023;

(4) Claire Amanda Randall, a partner at Farrer & Co LLP, contained in a witness statement dated 23 October 2003;

(5) Richard Hogwood, a solicitor, dated 20 October 2003;

(6) Kevin Dunnell, a solicitor, dated 10 October 2023;

(7) Susan David, Vincent's former assistant, dated 12 October 2023.

[23]I was provided with a 1486 page bundle of documents, as well as other documents provided separately during the course of the hearing.

[24]I have made use of a transcript of the entire hearing.

Some comments on the evidence

[25]These appeals turn on events, some of which happened a long time ago, in circumstances where Vincent and other of the key protagonists are dead. Vincent left little in writing to assist with interpretation, here and now, of what he was doing and why. Therefore, this case has ended up as a challenging - and far from perfect - reconstructive exercise.

[26]In my view, the right approach, broadly speaking, is that described by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd

[2013] EWHC 3560 (Comm)

, as summarised at Paragraph [12] of his decision:

"[...] the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth."

[27]I also apply the guidance in Simetra Global Assets Ltd v Ikon Finance Ltd

[2019] 4 WLR 112

, where the Court of Appeal (Males LJ, with whom Peter Jackson and McCombe LJJ agreed) said (at [48]). "[...] I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including e-mails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence…".

The Key Issues

[28]The key issue is whether a charge arises to the Appellant under ITA 2007 ss 731-733.

[29]The Appellant argues:(1) These provisions do not apply at all, because the Accommodation Benefit was not provided out of assets "which are available for the purpose as a result of (i) the transfer, or (ii) one or more associated operations" within the meaning of ITA s 732(1)(c);

(2) If the provisions do apply, then the "motive defence" in ITA 2007 ss 737 and/or 739 and/or s 742A applies ('the Motive Defence') because Condition A in each section is satisfied;

(3) In any event, any charge arising under ss 731-733 constitutes a restriction of directly effective rights under Article 63 of the Treaty on the Functioning of the European Union, such that the Motive Defence falls to be subjected to a conforming construction to the effect that 'tax avoidance' is understood in a sense of artificiality, and that the transactions in this case satisfy the domestic legislation when interpreted in that manner.

[30]The face of the Notice of Appeal recites two further grounds, which are that, if a charge arises, the conditions for making discovery assessments were not satisfied and/or that the assessments were otherwise made out of time (this applies only to the 2012/13, and 2013/14 assessments, made on 3 April 2017 and 2 March 2018 respectively); and, in relation to the penalty assessments, that the Appellant was not careless. However, these two grounds are not expanded on in the more detailed and substantial Grounds of Appeal.

Findings of Fact

[31]On the basis of the evidence which I have read and heard, I make the following findings of fact.

Namib Limited

[32]On 12 July 1994, Vincent incorporated a Jersey resident company called Namib Limited ('Namib').

[33]It was and remains Jersey resident.

[34]Namib's issued share capital was 10 x £1 shares.

[35]Its secretary was Mourant and Co Secretaries Ltd ("Mourant").

[36]On 3 March 1995, Vincent wrote to Mourant that they were currently holding to his order, in the names of two nominee companies, all the shares in Namib, which were in future to be held to the order of Watcher Limited (for which, see below).

[37]On the same date, and consistently with this direction, the registered shareholders in the entire issued share capital of Namib each wrote to Watcher Ltd that the shares in Namib were to held for Watcher absolutely, and were not to be voted, transferred, dealt with or disposed of except in accordance with Watcher's written directions.

Watcher Limited

[38]On 15 February 1995, a company called Watcher Limited ('Watcher') was incorporated in Jersey.

[39]It had an issued share capital of 10 x £1 ordinary shares.

[40]It was (and remains) a Jersey resident.

[41]As at 15 February 1995, it owned a yacht, "Blest".

[42]On 3 March 1995, Vincent transferred (for no consideration) the beneficial ownership of Namib to Watcher.

The Blest Trust

[43]By way of a written Instrument of Trust dated 27 February 1995, Vincent established a discretionary trust called 'The Blest Trust' ('Blest').

[44]Blest is non-UK resident.

[45]By Clause C1 of the Instrument, Vincent settled Watcher's then entire issued share capital (tne £1 shares) on Blest, with effect from 27 February 1995. That meant that the Watcher shares were settled property of the Blest Trust within the proper meaning and effect of section 43 of the Inheritance Tax Act 1984.

[46]The original trustee of the Blest Trust was Mourant & Co Trustees Limited, which was resident in Jersey.

[47]The beneficiaries of the Blest Trust were Vincent (as the settlor), the Appellant (as his spouse), and their three children (then, all still infants).

[48]On various dates between 25 July 1995 and 8 September 1997, Vincent settled additional property on Blest, coming to about £105,000.

[49]There is no evidence that the Blest Trust made any distributions in favour of Vincent. On that footing, the Blest Trust did not appear to be for Vincent's benefit but for that of Mrs Moran and the children.

[50]The proper law of the Blest Trust was the law of the Island of Jersey.

Highlands

[51]In early December 1987 (and not July 1994, as set out in HMRC's Statement of Case), Vincent bought a residential dwelling-house and surrounding land known as 'Highlands' for £500,000.

[52]Highlands is a very large handsome detached Edwardian 'Arts and Crafts' style property in a suburban location in the south of England. It has three floors, seven bedrooms, and an attached two-bedroom annexe. It sits in about an acre of secluded gardens, on an elevated site with some far-reaching views.

[53]There is evidence in a hand-written note dated 8 January 1987 (perhaps a mistake for 1988) that Vincent intended to spend significant sums in refurbishing and extending Highlands. The latter involved building a new triple garage block, an indoor swimming pool, and a driveway. All those works were done.

[54]Highlands was obviously intended to be the Moran family home, and the Appellant and the three children moved in. The Appellant has lived there ever since.

[55]In October 1994, Vincent left the UK, and most of his time thereafter was spent largely abroad, including time on his yacht.

[56]According to a notification to the Inland Revenue, Vincent, by way of a transfer dated 15 December 1995, transferred his freehold estate in Highlands to Namib for a stated consideration of £500,000. The entire purchase price (together with an additional amount of £5450, which was lent by Blest to Vincent to pay costs related to the sale) was not paid, but was left outstanding, and still is. It was not bearing interest.

[57]Namib became the sole registered proprietor of Highlands on 11 March 1996.

[58]As said, the Appellant (who is an Irish national but who was UK resident/ordinarily resident during the relevant years) still lives at Highlands. Damian also lives there, after a few years spent away. The other children (now adults) moved out some years ago.

[59]The Appellant's occupation of Highlands is ostensibly governed by a licence to occupy, which I shall discuss at more length below.

[60]In 2022, Highlands was professionally valued at £2.7m. The agents considered that, let on a two-year tenancy (which will have been an assured shorthold) it would attract an annual rent of £63,000.

The Watcher Loans

[61]Beginning with the year ending 31 March 2000, Watcher has made loans to Namib ('the Watcher Loans').

[62]For the years in dispute in these appeals, the following loans were made, with sums said to have been spent on costs relating to Highlands: y.e Loan Spent on Highlands %age 31.3.13 50,894 39,427 77.4 31.3.14 52,968 21,278 40.1 31.3.15 30,931 7,776 25.1 31.3.16 43,985 9,602 21.8 31.3.18 78,171 13,952 17.8 31.3.19 40,794 16,394 40.1 Totals: 297,743 108,429 36.4

[63]On 25 September 2012 (that is to say, in the year ending 31 March 2013) Watcher resolved to make a £200,000 loan to Namib; but this does not appear in the above agreed figures. In response to an inquiry from me, information was provided to me that, despite the intention, this loan was not in fact paid, but had (it was said, "inadvertently") been included in a letter from RSM to HMRC dated 12 July 2016 in the bundle. I accept that explanation; but it nonetheless shows some lack of transparency in the arrangements between Watcher and Namib, in the sense that decisions being taken in Jersey were not necessarily known to or communicated effectively to the Appellant's representatives in London.

[64]On the second morning of the hearing, I was provided with a document, prepared by Ms Kleis on behalf of the trustees, from their ledgers and records, which summarised the loan balances at each year-end for each year from 2013 to 2023 inclusive (in circumstances where, it was explained, there might have been a series of smaller loans over the year). I have not been able to reconcile the year-end figures with the (ostensibly, agreed) figures above, but I proceed on the basis that the year-end figures in Ms Kleis' document are the correct ones, and any calculation adjustment can be made by the parties on that footing. More detailed inquiry as to the figures is not possible, because the underlying ledgers and records have not been disclosed in these appeals.

[65]The various costs relating to Highlands are said to have included: electrical services; maintaining the swimming pool; carpet services; property insurance; gardening; tree planting; maintaining boundary hedges; central heating; installing security gates; roofing; plumbing/boiler repairs.

[66]There were also loans made for years ending 31 March 2000 (£67,800; with no information as to what, if anything, was spent on Highlands); 31 March 2001 (£31,980; same comment as for 2000); 31 March 2011 (£26,022, of which £25,872 was spent on Highlands); and 31 March 2012 (£14,899, of which £13,349 was spent on Highlands). Those years antedate any of the years for which assessments or closure notices at issue in these appeals have been made.

[67]There was also a loan for the year ending 31 March 2017 (which is not a year in relation to which any assessment or closure notice falls to be dealt with by me in these appeals). It was £58,048, of which £8,035 was spent on costs relating to Highlands. Totals of years in disputes 297,743 108,429 36.4 Totals of years not in dispute 198,749 47,256 Overall: 496,492 155,685 31.3

[68]In April 2017, Mrs Moran's advisers informed HMRC that the directors of Watcher and Namib "have no records on who requested the loans provided to Namib. As the companies have the same corporate directors, it is expected that the request/decision was made by themselves".

[69]There is some evidence of the loans, on occasion, more or less matching certain items of anticipated expenditure. For example, on 17 July 2013, the directors of Namib resolved to accept a loan of £5,719.98 from Watcher; and also resolved to approve as an expense of Namib and pay a proforma invoice for £5,699.98 (ie, exactly £20 less) relating to the supply and planting of trees at Highlands. That proforma invoice shows that the supplier, based in Hertfordshire, had been instructed by someone to make the invoice out to "Namib Ltd (Moran) FAO: Damian Moran", at an address in Jersey. It seems likeliest that Damian Moran was giving the instructions for the work.

[70]There is also evidence that the Watcher Loans were being used by Namib to pay the Annual Tax on Enveloped Dwellings (ATED) from 2013.

[71]Hence, and as an overview:(1) Loans were being made as long ago as 2000;

(2) Loans were being made when Vincent was still alive;

(3) Loans were being made annually, without exception, from 2011 to 2019;

(4) A proportion of every annual sum loaned from 2011 onwards was spent on Highlands;

(5) There is no set sum or proportion to the amount of the loan being spent on Highlands;

(6) But overall, a significant proportion of the sums loaned was being spent on Highlands;

(7) No individual item was paid for each and every year. With the exception of "Property insurance", which was paid for each year with the exception of y.e. 31.3.2016, other sums seem to have been paid on an ad hoc basis.

[72]As declared by the Appellant's advisors in 2015, as part of information provided within the scope of the so-called Jersey Disclosure Facility, part of the premium for the insurance related to Highland's contents and possessions, which were not on any view assets of Namib, and which were therefore cannot properly have been an expense of Namib. The proportion was estimated at £1,249 for 2013/14, which was 40% of the insurance paid in that year.

[73]As Watcher's financial statements record, the Watcher loans were and are unsecured and interest free, and "whilst the loans are repayable on demand it is unlikely that they will be repaid within twelve months of the date of signing of the financial statements".

[74]Namib had no income producing assets of its own, and therefore could not pay for the maintenance or upkeep of Highlands without the Watcher Loans.

[75]I have already referred to two occasions on which the fabric of the property was damaged, and was paid for(i) by insurance paid for by Namib using part of the Watcher money; or

(ii) by Namib directly. I have also referred to Namib paying for things directly.

The February 1995 letter

[76]I now move to consideration of some key documents.

[77]On 15 February 1995, Mr K P Farley, described as an 'Authorised Signatory', for and on behalf of 'Mourant & Co Secretaries Ltd', ('Mourant Secretaries') of Jersey, wrote a letter to Vincent. Mr Farley cannot be asked about this letter, because he has since died.

[78]Even though the Blest Trust was not yet in existence, and would not begin to exist for another 12 days, Mr Farley wrote as if it were, and went on to write: "The Blest Trust As you know, this Trust is in existence to simplify matters in the event of your demise. Without it, the ownership of all the companies would 'fall into' your estate and probate would then have to be taken out in Jersey. This could result in some substantial tax liabilities arising which is obviously something we all want to avoid. With the trust in place the continuity of ownership is assured. With the exception of the Initial Settled Funds (usually £10.00) the only asset of the trust will be the 10 issued shares in Watcher Limited. As long as this is the case I would propose a fixed fee of £500.00 a year. This is for the provision of Trustees and all administration required including preparation of annual accounts".

[79]This brief passage was subject to fairly extensive analysis, submissions, and even (despite the fact that both the writer and the recipient are dead) attempts to cross-examine as to its meaning. These efforts focussed on (inter alia):(1) The significance of the letter describing the Blest Trust as 'simplifying matters in the event of Vincent's demise';

(2) The meaning of 'all the companies';

(3) Whether "substantial tax liabilities arising" meant IHT liabilities, or some other tax liabilities;

(4) Whether it was meant that these liabilities were in Jersey, the UK, or somewhere else;

(5) The meaning of "to avoid".

[80]This letter is definitely a species of evidence, and thereby has importance in that it is contemporary with the arrangements described above. But its ultimate evidential value is a matter of weight.

The April 1995 file note

[81]On 10 April 1995, Mr Farley wrote a file note, concerning the Blest Trust and Namib, which read as follows: "We have received a phone call from Bennett's Solicitors regarding the vesting of Vincent Moran's own property in the UK in the Jersey Trust. I emphasised to V J Moran at our last meeting that we were not prepared to accept this property direct into the Trust as it is against in-house policy, and at that time I suggested putting it into Namib Ltd. Having received a letter from Mr Bennett this morning it appears that Mr Moran has not yet notified Mr Bennett of this fact and therefore I telephoned Vincent Moran and re-emphasised the fact that the ownership of the property should be vested in Namib Ltd which will only ever be used for holding his personal assets, and will not enter into any contract etc with any third parties. I also emphasised very strongly that we would only do this subject to our receiving the relevant tax advice from Mr Moran's accountant in writing. [...]

[82]I have not seen the letter from Mr Bennett. I am taking it that he was a partner in the eponymous James B Bennett and Co Solicitors who acted for Vincent when he bought Highlands. It ceased trading in 2015, and all its pre 2003 files were destroyed. Mr Newell of that firm is still in practice, at another firm, was contacted by the Appellant's representatives in connection with this dispute, but had no recollection of his dealings with Vincent.

[83]As matters unfolded, Highlands was not placed directly into the Blest Trust; and the transfer of Highlands into Namib did take place in December 1995.

[84]It seems to me that Mr Farley was saying that Mourant would not countenance Highlands going into Blest in any circumstances, and was only prepared to countenance Highlands being placed into Namib with "relevant tax advice". I do not believe that Mourant and/or Mr Farley on their behalf, having expressed a clear view, would then simply have turned a blind eye to Highlands going into Namib. Given that Highlands was placed into Namib, then it does seem to me likelier than not - and, hence, a fact - that Mourant did receive something that they were prepared to treat as "relevant tax advice". But the giver of that advice, its content, and its cogency remain unknown to me.

[85]I agree with Mr Hogwood, as he identified in correspondence to Mourant in 2004, that it is somewhat surprising that there is no evidence before me that anyone had advised Mr Moran on the setting-up of the Blest trust. This is despite Farrers, in anticipation of this appeal, and 20 or so years after the event, making extensive inquiries, but being unable to find anyone prepared to volunteer the information that they had given tax advice to Vincent about anything.

[86]Some persons approached, in place of outright denials, limited themselves - perhaps unsurprisingly - to observing that they had no recollection of their dealings with Vincent in the 1990s; or had only dealt with him in the 2000s or with his estate; others said that they could not recall and - again, perhaps unsurprisingly - had disposed of any papers.

[87]It seems to me very likely that someone did. But who that was (and what that advice might have been) is now lost in the mists of time.

[88]Shortly after Vincent's death, it was thought that a firm, Blackstone Franks, had offered tax advice on the establishment of the Blest Trust; but this was robustly denied by that firm's Mr Maas in correspondence in January 2003. I do not see any reason for Mr Maas to have been untruthful about that. I do not read his letter as nuanced, and I accept his denial of involvement in setting up the Blest Trust. I do not draw any inferences adverse to the Appellant from the failure to have called Mr Maas to give evidence.

[89]There is a suggestion in correspondence that Blackstone Franks were appointed in place of Touche Ross (as it then was), and there is no evidence in the bundle that any inquiry was directed by Ms Randall in 2023 to the successor practice of Touche Ross. However, in her oral evidence, Ms Randall said that the absence of correspondence between her and Touche Ross 'appeared to be an omission' and had 'slipped off the table' (meaning the table in her witness statement). Although this position was perhaps not entirely satisfactory, she said that there had been an email from Deloittes who had not been able to find anything in their historic files, and I accept that evidence, such as it is. It seems inherently likely; and I do not see any reason why Farrers, who had gone to great lengths, would (in effect) suppress information which might have led them to discovery of the giver of tax advice.

[90]It emerged in cross-examination of Mr Hogwood that perhaps there were even more advisers than recorded on Ms Randall's table as having been approached by her: McEnglish and Carter, and Radcliffes Crossman Block. So, the trail as to who was advising Vincent in 1994/5 runs cold. Which, it should be said, is scarcely surprising 30 years afterwards.

[91]However, one impression which emerges distinctively from these enquiries and the evidence as a whole is that Vincent was a man with eclectic business interests, in the UK, Europe, and further afield, who made use of a range of professional advisers, in different disciplines and across different firms, with the effect (intended or not) that one adviser might not know of the existence of another, let alone their identity. One of Vincent's former business partners, who had also been one of Vincent's executor, said that the executors had not been able to determine anything about what Vincent was doing in Jersey:

"it was like a blank door"

. As Mr Hogwood, tasked with Vincent's probate put it: "no one person, other than him, seemed to know all the different things which were going on business-wise in his life".

[92]Another striking feature - not without relevance in this appeal, especially when it comes to assessment of the motive defence - is that, for a wealthy man of such varied business interests, Vincent does not seem himself to have routinely committed much to paper. I have seen very few documents, only of a formal character (eg his will, and his DOM1, discussed below) from his own hand.

Vincent's DOM 1

[93]On 3 April 1996, Vincent signed and filed a Form DOM1 (Income and Chargeable Gains - Domicile) with HMRC, which dealt with his domicile for the purposes of Income Tax and Capital Gains Tax.

[94]The contents of that form were accepted by the UK Revenue authorities (at that time, the Inland Revenue). It records:(1) Vincent had been born in Ireland in 1948, and had left Ireland to come to the UK for business reasons;

(2) He had kept a 3 bedroom house and 40 acres of land in Ireland, and intended to return to Ireland when he retired;

(3) He had been resident in the UK until 30 September 1994;

(4) Highlands was "available for his use";

(5) The capacity in which Vincent occupied it was stated as: 'owned by an overseas company which is wholly owned by a non-UK settlement';

(6) The Appellant was 'permitted to live there as a beneficiary of the settlement';

(7) Vincent set out his "intentions for the future" as follows: "I intend to live in the Channel Islands. I am currently living in Guernsey but may move to one of the other Islands. I do not intend to return to the UK as my main business interests are no longer there. I am currently engaged in a development project in Guernsey".

[95]In 1998, Inland Revenue were sending Vincent's self-assessment return to an address in Guernsey. On his return for the year ending 5 April 1998, signed on 18 February 1999, he declared that he had not been resident in the UK for 1996-7; was not domiciled in the UK; nor resident in the UK; and not ordinarily resident in the UK. He did not state how many days he had spent in the UK between 30 September 1994 and 5 April 1998. He declared that there had been no relevant change in his circumstances during the year ending 5 April 1998. He did not fill in any continuation sheets for UK land and property, or for "Trusts settlements and estates". He only declared employment income from 2 UK employments and directorships: Creston Land Estates; and Drings of Bath Ltd. The available evidence is that he did not file self-assessment returns for 1999/2000, 2000/2001, or 2001/2002.

[96]In November 2001, the Inland Revenue's Special Compliance Office, in correspondence with Vincent's then-advisers, Messrs Blackstone Franks, accepted (inter alia) that Vincent had not been resident in the UK between 1 October 1994 and 5 April 2001.

[97]Vincent died part way through 2002/2003.

The 1998 Memo

[98]On 4 March 1998, one Angela McKay at Mourant wrote a Memorandum to Mr Farley in anticipation of a meeting between Mr Farley and Vincent which was to take place on the following day. There are handwritten notes on that memo, which I take to have been made by Mr Farley during the meeting.

[99]The meeting seems to have been intended to be a comprehensive review of Mr Moran's companies and interests, including Watcher, Namib, and the Blest Trust.

[100]The Memo and manuscript additions ('MS') read as follows: "The Blest Trust No problems Watcher Ltd No problems Namib Ltd 1. Although I have already advised VM about the legal charge over the property in favour of Bidworth, please reiterate that should Namib face a creditors' winding up then this legal charge could be set aside by the liquidator because the transaction had no value. This, therefore, defeats the whole object of the exercise. Manuscript note: Vincent is aware of this and the reason is 'ring fencing' for potential liabilities in the UK. 2. Should be concerned that Namib will always be in deficit? It does not generate enough income to support its expenses. Also, how would the Company ever be in a position to repay Vincent £500,000 for his property [ie, Highlands] (current shown in the books as a long-term creditor). Manuscript note: VM to write? If he has not do so. GENERAL QUERIES: 2. Please ask VM what the tax implications are on the above. Most of the business conducted within the companies is generated from UK and therefore could possibly be subject to UK tax. Manuscript note: Robert Maas". (this being Mr Maas of Blackstone Franks).

The licence to occupy Highlands

[101]The Appellant's occupancy of Highlands was (and, as far as I am aware, remains) ostensibly regulated by a 'Licence to Occupy' granted by Namib in April 2001; ie, whilst Vincent was still alive. The licence purportedly has retrospective effect from the date of transfer, namely 15 December 1995. No-one was able to give any satisfactory evidence as to why this document was executed at all, let alone executed over 5 years after the transfer to Namib; nor why nothing was done in this regard whilst Vincent was still alive.

[102]The licence, even on its face, is a confusing document. It is ostensibly of unlimited duration, with either party at liberty to give one month's notice. There is no rent or monetary or substantial consideration: in that sense, it is gratuitous.

[103]In 2016, Mrs Moran's advisers told HMRC that there had been no amendments to the licence, "nor any changes to the responsibilities of either party to the licence".

[104]Fortunately, I do not need to decide the juridical status of Mrs Moran's interest thereby ostensibly created or recorded (nor speculate whether she would have asserted, or been able to assert, a beneficial interest of some kind, or a protected occupational interest, under the Family Law Act, or the Matrimonial Causes Act, in Highlands, as the former matrimonial home, had she and Vincent divorced).

[105]It is a curious lease-licence hybrid. On the one hand, it carefully spells out that Mrs Moran was not to have "exclusive possession" (the substantial touchstone of a lease: see the landmark decision of the House of Lords in Street v Mountford). On the other, it purports to impose a swathe of burdens on Mrs Moran more typically encountered in a lease - for instance, the obligations to "be responsible for all and any repairs and decoration which the Licensor shall consider necessary at the property whether to the exterior or interior thereof", and to be responsible "for the payment of all and any services and other outgoings relating to the property and the occupation thereof".

[106]Mrs Moran had signed it, but could not satisfactorily explain why she had done so, or the circumstances of her doing so, or what (so far as her evidence on this would have been relevant) what she thought it meant.

[107]It is sufficiently clear that the terms of the Licence were not in fact being slavishly followed or applied in that Mrs Moran was not paying for, nor being asked to pay for, many of the repairs and decoration to interior and exterior. There was no satisfactory evidence as to why the Watcher loans were being used, even in part, to meet expenditure on Highlands in relation to items for which liability was ostensibly imposed on Mrs Moran by the licence. This is against the background where, as her filed self-assessment returns show, she enjoyed significant personal income, and could have paid for these things herself.

[108]My criticism as to the overall unsatisfactory state of the evidence in relation to the licence is not solely directed at Mrs Moran. Ms Kleis, in her evidence, also mentioned paying for things such as a new kitchen (not mentioned in the agreed facts) and Council Tax (a liability imposed on Mrs Moran by Clause 4(c) of the Licence) for Highlands. Hence, those items were being paid for by Namib. But Ms Kleis, the trustee, could not really explain why that was so. I did not find her evidence on this point easy to follow, but, doing the best that I can, the gist of it was that each expense was being considered by the trustees more or less 'in isolation', and without any meaningful reference to the Licence.

[109]In January 2009, there was an escape of water in the annexe, causing damage to the fabric of the property (which belonged to Namib) and to the contents (which did not belong to Namib), which was met by insurers, who paid just under £50,000. The insurance premium was paid for by Namib, using moneys loaned by Watcher.

[110]In 2012, extensive works were done in building new gates and a driveway. Those works were commissioned by Damian Moran and the Appellant, but paid for by Namib.

[111]In 2013, extensive works were done in planting trees around the boundary. Those works were commissioned by Damian Moran, but invoiced to and paid for by Namib.

[112]In February 2014, there was storm damage to the roof. The roofers invoiced Namib, who paid.

[113]In the winter of 2017 the boiler in the annexe broke down. This was repaired at Namib's expense. A boiler in the main house also broke down at some point between 2016 and 2018, and was eventually repaired at Namib's expense.

[114]In 2019 (in a letter marked "without prejudice", but included in the hearing bundle) Farrer and Co asserted that Namib's expenditure on these matters "represents debts owed by Mrs Moran to Namib on an interest-free basis". This is not an analysis which was pursued before me; and which, in any event, is not supported by any documentation. So far as it goes, I do not believe that Mrs Moran regards herself as owing these moneys to Namib.

[115]In my view, the Licence is a sham in the conventional legal sense because it does not actually reflect either party's rights and obligations in Highlands. But, even if not a sham in that sense, it cannot safely be regarded as an accurate or reliable statement of the respective parties' rights or obligations, as they have actually been viewed and/or put into effect.

[116]However, the very fact that the Licence was drawn up, and executed, and ostensibly regulates Mrs Moran's occupation, must all have been done for some reason known to the parties at the time, and is itself a form of evidence as to the intent of the structure set up by Vincent, and how that structure was in fact operated.

The Castletown Trust

[117]By way of a written Instrument of Trust dated 10 October 2001, Vincent as settlor created the Castletown Trust ('Castletown').

[118]The original trustee of the Castletown Trust was Mourant & Co Trustees Limited, which was resident in Jersey.

[119]The beneficiaries of the Castletown Trust were Vincent, the Appellant, and their three children.

[120]Vincent therefore, as at 10 October 2001, had created a double trust structure, in the sense that Blest and Castletown were thereafter existing in parallel. That gave rise to the possibility that Blest, if it was minded to transfer any assets, could do so to another trust also settled by Vincent (who, as at October 2001, was no longer deemed to be domiciled in the UK for IHT purposes).

[121]Which is what happened. About a fortnight later, namely on 26 October 2001, Watcher's directors minuted as follows:

"Namib Limited, Assignment of Company: IT WAS NOTED that further to a restructure of the assets held in the Company, the Directors had discussed transferring the ownership of one of the underlying companies, Namib Limited, to a Trust, known as "

The Castletown Trust", this Trust being for the benefit of the ultimate beneficial owners of the Company. Namib's sole asset being the property known as 'Highlands'."

[122]It was resolved that Watcher transfer the ownership of "the underlying company, Namib, to the Castletown Trust, and that one of Watcher's directors be authorised to sign the letters to the nominee shareholders, Juris Ltd and Lively Ltd, instructing them that the beneficial interest in the shares was to be transferred to Castletown.

[123]Since the shares in Namib were not held by the trustees of the Blest Trust, they were not until that point settled property or property comprised in the settlement held by the Blest trustees.

[124]The proper law of the Castletown Trust was the law of the Island of Jersey.

[125]Namib continued to owe Vincent £500,000 plus £5,450 = £505,450.

[126]Following his death in August 2002, that sum is now owed to the Vincent Moran Will Trust.

The 2002 Attendance Note

[127]On 17 October 2002 - that is to say less than two months after Vincent's death - a meeting took place in Jersey between solicitors from Speechly Bircham and Mourant and Co. A contemporary Attendance Note records that all the assets held in the Blest Trust were outside Vincent's estate for UK inheritance tax purposes and that the Blest Trust had three purposes:

"Estate planning"; "

Asset protection from the UK Inland Revenue"; and "An investment vehicle, thereby avoiding the need for Vincent's name to be associated with certain deals". It was recorded that Vincent wanted Mrs Moran "maintained to her present standard", and that "the Jersey Trust" had sufficient assets to achieve that aim.

[128]I treat this Attendance Note as good and cogent evidence; it was written by professionals, recording a discussion with other professionals, at the time, in relation to a matter where the persons at Mourant (Mr Kempster and Ms de Gruchy) could reasonably be expected to have known why Vincent had done the things he had done involving Mourant, and whose recollection would not have been affected by the passage of time. Ms Kempster and Ms de Gruchy were the persons best placed to tell Mr Hogwood what had been going on in Jersey.

The 2010 Memorandum

[129]I have already set out some of the content of this. Mr Hogwood described the arrangements set out above as follows: "A pre-existing Jersey structure, run by Mourants (which Mr Moran had appointed) which it appears Mr Moran had settled without taking UK tax advice and in respect of which there was a tax liability. The quantum of this liability was then the source of negotiation with HMRC which is still being concluded".

discussion on liability

[130]It is common ground that the Appellant's rent-free occupation of Highlands is a benefit within the proper meaning and effect of the legislation.

[131]It is also common ground that income arose to Watcher, which was a "a person abroad": ITA 2007 s 718.

[132]ITA 2007 section 731 charges tax on income which is treated as arising to an individual under ITA s 732 (non-transferors receiving a benefit as a result of relevant transactions).

[133]Income is treated as arising under section 732 where a UK-resident individual receives a benefit which has been provided out of assets which are available for the purpose as a result of a relevant transfer or one or more associated operations.

[134]Section 719 defines "associated operation" as: "an operation of any kind effected by any person in relation to(a) any of the assets transferred;

(b) any assets directly or indirectly representing any of the assets transferred;

(d) any assets directly or indirectly representing the accumulations of income arising from any assets within paragraph (a) or (b).

[135]It does not matter whether the operation is effected before, after or at the same time as the transfer: ITA 2007 s 719(2).

Relevant transfers

[136]HMRC has treated the transfer of moneys by Vincent to the Blest trustees and/or Watcher as "relevant transfers" within ITA s 716.

[137]I agree. Watcher made investments. Income thereby arose to Watcher and/or the Blest trustees (who are persons abroad for the purposes of these provisions). The Watcher Loans were made from that income.

The Accommodation Benefit

[138]I have to determine this on the actual facts of this dispute, and not by reference to hypotheticals.

[139]I agree with HMRC that Highlands was made available to the Appellant in the relevant years as a result of, inter alia, the maintenance and repairs being funded by income and assets in Watcher.

[140]The Accommodation Benefit includes the provision of rent-free accommodation. That was a benefit to Mrs Moran who living for free where she would otherwise have had to pay to live, either at Highlands (the Licence to Occupy not conferring upon Mrs Moran any identifiable proprietary entitlement in Highlands) or somewhere else. In my view, in itself, this would suffice.

[141]Even if this narrow view were mistaken, it would nonetheless seem to me that the accommodation benefit on the facts of this case goes further than simply the provision of rent-free accommodation. It seems to me that the benefit has to be looked at in the round and in a common-sense way.

[142]This was a detached property, built in the early 1900s, which was going to call, and which did in fact call, for maintenance and repair.

[143]Whilst I am not to be read as importing a test of habitability, I cannot ignore the fact that here, the fabric of the accommodation, so as to render it fit for human habitation, in the sense of being wind- and water-tight, and properly heated, was being preserved by the Watcher Loans. This approach is consistent with the evidence of Ms Kleis, which I accept on this point, that things were being paid for so as to preserve the value of Highlands as a capital asset.

[144]To take some examples. But for Namib having paid for property insurance, the damage caused by the water leak in 2009 would have remained unfixed, and would have rendered the annexe - a substantial part of the overall dwelling - unfit for habitation. But for Namib's payment, tiles blown off the roof which were not replaced would inevitably have led to the further ingress of wind and water into the main house. Namib also paid for the boiler repairs - that is to say, made hot water available (whether reliably, or indeed, at all). Even if the broken boilers affected the non-annexe part of the house, with hot water and heating remaining available in the annexe, there is still a substantial impediment to enjoyment of the property as a whole.

[145]It does not matter that Mrs Moran had money personally available to her to have fixed these things if Namib had not paid, because that is not what actually happened.

[146]Even if that were not sufficient, Namib was making payments for other things at the property, making use of money which can only have come from Watcher. This feeds into the benefit (or, put differently, contributes to the outcome) because, in the wider sense, the benefit of the accommodation was not just being able to live there, in the sense of eating and sleeping, but in my view, looked at holistically, includes being able to enjoy its amenities, as a home, such as the indoor swimming pool, and the garden, all in privacy arising from the things which were done with the electric gates and the trees around the garden: all being things paid for by Namib. I do not consider that it is appropriate to seek to segregate matters such as trees round the garden and the gates from things such as the roof and boiler repairs; nor the 'essential' from the 'nice to have'. All contribute to the amenity of the property.

[147]I also agree with HMRC that the Watcher Loans are "associated operations" within the proper meaning and effect of section 719.

[148]Section 719 (meaning of "associated operation") is widely drawn:

"Associated operation", in relation to a transfer of assets, means "an operation" "of any kind" "effected by any person"

. These apply to 719(1)(a) to (d), which are also widely drawn (for example, this is not just the assets themselves, but assets directly or indirectly representing those assets, income from the assets or direct- or indirectly- representative assets, or assets representing the accumulation of income.

[149]Section 716(1) refers to a transfer of relevant assets if it is a transfer of assets, and, "as a result of" the transfer, or one of more associated operations, or the transfer and one or more associated operations, income becomes payable to a person abroad.

[150]In my view, it is a mistake to read "as a result of" too restrictively. Whilst it definitely connotes a causal link between the "transfer" and the "associated operation", it does not stipulate that the causality should be direct (as opposed to indirect), or immediate (in the sense of without any intermediate or intervening cause), or should be solely and exclusive (in the sense that there cannot be any other contributory cause), or should happen within a particular timescale.

[151]Hence, it is a mistake to identify, as the Appellant has sought to, Vincent's sale of Highlands to Namib and the licence as being the only two operative transactions. In my view, that is to ignore (wrongly, because inconsistent with the tenor of the legislation) Vincent's establishment of Namib, Watcher, Blest, and Castletown; the transfer of Watcher's shares into Blest; the transfer of Namib to Watcher; and then to Castletown. It would also be to ignore my findings as to the Licence to Occupy; or (in relation to that Licence) would be to treat the Licence entirely at face value, and without any ability to look to the reality of the situation and how that measured up to the Licence.

[152]Even if I was wrong about that, and the only two operative matters were the sale to Namib for consideration left outstanding as an interest-free loan, and the Licence to occupy, I would nonetheless still have considered these to be operations done in relation to the assets and income of Watcher within the proper meaning and effect of ITA ss719(1)(a) to (d).

[153]There is a still further analysis, at one point advanced in correspondence from Mrs Moran's advisers (and included in the hearing bundle), which leads to the same result, being to treat the moneys paid by Namib for things which, on the face of the licence, should have been paid for by Mrs Moran, as interest-free loans by Namib to her.

[154]Overall, I have no doubt that there is income arising within the overall offshore structure that was available, in all relevant years, to be matched against the accommodation benefit.

The making and standing of the discovery assessments

[155]There are two discovery assessments in issue:(1) 2012/13, made on 3 April 2017;

(2) 2013/14, made on 2 March 2018.

[156]Discovery assessments made for (inter alia) 2014/15 and 2016/17 were cancelled by HMRC on 9 September 2021. Penalty assessments for (inter alia) 2012/13, 2016/17 and 2017/18 were cancelled on that same date. I give those no further consideration.

[157]Mrs Moran's originally filed self-assessment returns for 2012/13 and 2013/14 do not declare the receipt of the Accommodation Benefit. But Mrs Moran knew that she was occupying Highlands rent-free, knew that it was owned offshore, knew that the money to maintain Highlands was coming from Jersey, knew of both Blest and Castletown, and knew both how her occupancy was ostensibly regulated (namely, by the Licence to Occupy) and how it was actually operated (in terms of who was actually paying for what). To have remained silent as to her rent-free accommodation in her self-assessment returns was, at the very least, careless. I do not agree (as argued in correspondence from her representatives, but - sensibly - not pursued by Mr Elliott) that Mrs Moran was completely oblivious of the arrangements at the time: the evidence shows that was she was copied into emails passing between Mourant and her London advisers, Blackstone Franks, in October and November 2012, with the subject matter "Mrs Anne Moran and her children and the Blest Trust" which discussed the Blest Trust, and the Castletown Trust, and the 'trust structures'.

[158]The discovery assessments for each of these years recalculate gross foreign income: £60,000 declared in 2012/13 is adjusted to £117,264 (to add-in the Accommodation Benefit), increasing overall gross income accordingly. £3,761 declared in 2013/14 is adjusted to £63,491, with a like increase in overall gross income.

[159]In order for HMRC to make a discovery assessment, there must be a potential loss of tax brought about carelessly or deliberately by the taxpayer or a person acting on their behalf, or, at the time when an officer of Revenue and Customs ceased to be entitled to give notice of their intention to inquire into the taxpayer's return in respect of the relevant year of assessment (ie, at the end of the inquiry window) the officer could not have been reasonably expected, on the basis of the information made available to them before that time, to be aware of the potential loss.

[160]The discovery assessments were made as the end-product of a process set in motion in April 2015 when HMRC accepted Mrs Moran into the Jersey Disclosure Facility. A disclosure report made on Mrs Moran's behalf in July 2015 (albeit only up to and including 2012/13; and therefore not including 2013/14) set out some of the facts underlying Mrs Moran's rent-free occupation of Highlands, but asserted that no relevant income was attributable to this, but only to that part of the insurance premium paid by Namib which related to Highland's contents. An Officer of HMRC's Fraud Investigation Service, Officer Anwar, thereafter engaged in protracted correspondence with Mrs Moran's representatives, under Code of Practice 8, seeking further information and documents.

[161]The Appellant challenges the fact that the assessing officer, Officer Anwar, has not been called by HMRC, and submits, on the basis of this Tribunal's decision in Rakshit

[2023] UKFTT 1044 (TC)

(Judge Greenbank) that I should peremptorily allow the appellant's appeal against the discovery assessments on that basis.

[162]In my view, this misunderstands and misapplies Rakshit (which, in any event, does not bind me). There, the Tribunal allowed a late witness statement from an HMRC officer on the issue of discovery, but this was not challenged, and a discovery in the requisite sense was proved: see Paras [151]-[154]. That was simply the precursor to a more extensive argument in that case (not present here) concerning whether those assessments were made in time.

[163]In my view, in this case, it was not necessary to call Officer Anwar. The only point in dispute was the making of a discovery. There was no argument as to time-limits. I do not apprehend Judge Greenbank to have been saying that an officer must always, and invariably, be called to give evidence of discovery, especially where discovery is the only point.

[164]I have considered the letter from Officer Anwar to Mrs Moran dated 11 January 2017, responding to RSM's letter of 30 November 2016, and especially Section 4 of the January letter ("Transfer of Assets Abroad"). This letter is evidence, and it has significant weight. It comes from the assessing officer, who had been extensively involved with the matter for at least 18 months. It was written at the time. It is detailed, and sets out, intelligibly, why the officer was doing what he was. I agree that the letter speaks for itself. It is clear to me, reading the letter, that it contains a discovery in the requisite sense and discharges HMRC's evidential burden in that regard.

[165]For the reasons already set out above, the potential loss of tax was brought about at least carelessly because there is no mention of the Accommodation Benefit on the self-assessment returns.

The Motive Defence

[166]Where all the relevant transactions were effected after 4 December 2005, ITA 2007 section 737 provides for an exemption from Income Tax under the TOAA regime. This provides, materially, that an individual is not liable to income tax if the individual "satisfies an officer of [HMRC] that Condition A is met".

[167]Condition A is: "that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions were more than incidentally designed for the purpose of avoiding liability to taxation": see ITA 2007 s 737(2)(a) and (3).

[168]In determining the purposes for which the relevant transactions or any of them were effected, the intentions and purposes of any person within [s 737(6)] are to be taken into account: see s 737(5).

[169]A person is within s 737(6) if, whether or not for consideration, the person(a) designs or effects, or

(b) provides advice in relation to, the relevant transactions or any of them: s 737(6).

[170]Where all the relevant transactions were effected before 5 December 2005, ITA 2007 section 739 provides that an individual is not liable to income tax:(1) If the individual satisfies an officer of HMRC that Condition A is met;

(2) Condition A being "that the purpose of avoiding liability to taxation was not the purpose, or one of the purposes, for which the relevant transactions or any of them were effected": s 739(2) and (3).

[171]Section 740 provides that, where the relevant transactions include transactions effected both pre-5 December 2005 and post-4 December 2005, then no liability applies where the conditions (i) in s 739 are met for the pre-transactions and (i) in s737 was met in relation to the post-transactions.

[172]Section 737(2) provides that "an individual is not liable to income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs (a) that Condition A is met". I note the reference to "income tax".

Witness evidence

[173]I repeat my remarks from earlier in this decision about the likely role and weight to be attached to oral evidence in a case of this kind.

[174]I also repeat my observations about Mrs Moran's evidence, and my approach to it.

[175]The witness evidence of Mr Dunnell in part concerned the potential tax consequences of certain steps taken in the mid 1990s. In a nutshell, that evidence seeks to explain why, if they had been asked at the time to create a tax-efficient structure to hold a residential property in England, would not have done it in the way it was done. Ultimately, I have not found evidence of that character enormously helpful or probative.

[176]I did find Mr Hogwood's evidence to be of some assistance. He was able to speak with knowledge and authority as to the protracted and challenging process of trying to sort out Vincent's estate.

[177]Ms David was someone who would have had contemporary knowledge of Vincent's dealings. But she was a cagey and somewhat combative witness, and it seemed to me was reluctant to say anything which might prejudice the case of Mrs Moran, even to explain or expand on things which she had said in her written evidence. I place no weight on her evidence.

[178]Julie Kleis' evidence was of some assistance, but my impression is that it was sometimes deliberately obfuscatory. Even though she is a professional trustee working in Jersey, she disavowed (to my eyes, not convincingly) any ability to advise or talk about probate in Jersey, or tax, or law. This weakens the reliance which can be placed on her evidence. She could not really explain why the ledgers and records showing the Watcher Loans (if relevant, as the document produced during the hearing suggested they were) had not been produced; or what might be found in them if they were disclosed. She sought to downplay the proportion of the Watcher Loans which were spent on the property, and sought to explain the expenditure on the basis that the trustees were obliged to preserve the value of the property by paying for 'various minor repairs' even though this did not accord with the terms of the Licence - something which Ms Kleis should have been able to satisfactorily explain, but could not (and which, indeed, seemed to come to her as a surprise). Nor could she explain why there were no disclosed board minutes dealing with the items of expenditure which she said were approved on Highlands.

[179]I do not find the evidence of Damian Moran to be of material assistance in resolving this dispute. Insofar as going to his father's motives and actions, at the time of the events referred to, Damian would only have been in his mid-teens.

Discussion on the Motive Defence

[180]The weight to be attached to the evidence is important here, because the burden of establishing the Motive Defence is on the Appellant.

[181]In my view, Condition A is not met, in that the Appellant has failed, on the evidence which has been made available to this Tribunal, to discharge this burden, which means that the Motive Defence is not available to her.

[182]The Appellant's task in relation to the Motive Defence was always going to be a difficult one because she has been tasked to prove a negative. The challenge is only accentuated by the passage of time (here, up to almost 30 years), the intervening deaths of Vincent and Mr Farley, the retirement of many of the participants, and the paucity of contemporary documentary evidence.

[183]Of course, circumstantial evidence is still a species of evidence, and admissible, but ultimately the issue is one of the weight to be attached to such evidence. The evidence is of two kinds: positive - from surviving documents and witnesses who knew Vincent at the time - and negative: as Mr Elliott put it, "to try and rule out alternative theories as to what might have happened at the time". But, in my view, both efforts fail; both individually and in concert.

The 1995 letter

[184]Great reliance has been placed by both parties on the 1995 letter, and the passage set out above. Such was the perceived standing of this letter as the keystone of the case that I was at one point invited by the Appellant to give a preliminary ruling on it; an invitation which I declined.

[185]In my view, the interpretative exercise applied to the 1995 letter is unproductive in resolving this dispute, one way or the other. It does not seem to me as if the letter is even remotely capable of bearing the weight of competing interpretations - semantic and legal - which the parties have sought to place upon it.

[186]This is for a number of reasons.

[187]The letter is not a formal legal document such as a contract, or a will where (perhaps) established rules of interpretation might assist.

[188]The passage referred to has to be viewed in context. It is a short passage in a much longer (4 page) letter, the express overall purpose of which was to deal with 'a comment' from Vincent (made in a letter dated 30 January 1995, which I have not seen) about the level of management and administration fees he was paying Mourant Secretaries in relation to "Domitia Limited and Associated Companies" (of which there were seven, including Watcher and Namib).

[189]Vincent was paying £1000 per annum per company in advance by way of management fees, and administration fees being charged on a time-spent basis. The overall purpose of the letter is that it set out a series of fee quotes for the ongoing management and administration charges for 7 Jersey companies: Watcher; Domitia Ltd; Namib; Bidworth Ltd; Compton Ltd; Hackwell Ltd; and Stelling Management Ltd. As part of this, the letter sets out a fee quote for Blest "for the provision of Trustees and all administration required including preparation of annual accounts".

[190]In my view, the best available evidence about the letter comes from Ms Kleis. She thought that Mr Farley was not a lawyer; and was not a UK tax adviser; and she did not believe that Mr Farley was qualified to advise on UK tax. I accept her evidence on this point.

[191]Indeed, this is consistent with Mr Farley's comment, in relation to Stelling Management Limited, that Vincent should "obtain the necessary tax advice" in relation to it. Mr Farley was not giving any; and obviously wanted to be clear that he was not giving any.

[192]Striving not to engage in the same inappropriate analytic exercise for which I have criticised the parties, I simply observe, as a matter of ordinary language used in an ordinary way, that it seems to me that the letter refers to affairs in Jersey, and not in the UK. The only assets referred to are all "the companies", and those were all in Jersey. The "substantial tax liabilities arising" referred to can only, linguistically, have been in Jersey. There is no evidence whether "tax" have meant "duty" (in the sense of Probate Duty, being a duty payable in Jersey) or something else; and discussion on the point is ultimately sterile. The word "avoid", to my mind, is simply used in a colloquial sense, and not in a technical tax sense.

[193]It has to be said that the very fact that the Appellant, who bears the burden, strives to urge me to treat the letter as important - indeed, as potentially determinative of this dispute - itself speaks volumes as to the overall (sketchy) state of the other evidence.

[194]Read objectively, there is simply nothing to indicate that the letter was ever intended to articulate a definitive and/or comprehensive view of the tax position, whether in the UK or anywhere else. And it did not do so. Indeed, it is completely silent as to the type of tax.

[195]Hence, and insofar as the Appellant seeks to place reliance on this letter as going towards discharging her burden, she fails.

[196]On the totality of the evidence, and putting myself in the shoes of the notional HMRC officer for these purposes, I am not satisfied, even to the usual civil standard, that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions were more than incidentally designed for the purpose of avoiding liability to taxation.

[197]On the contrary, I draw the conclusion, from all the circumstances of the case, that any one or more of the transactions were more than incidentally designed for the purpose of avoiding liability to taxation, including, as relevant, income taxation.

[198]I also consider that the purpose of avoiding liability to taxation, including, as relevant, income taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected.

[199]It seems to me that the following are relevant.

[200]Shortly before the dealings with Highlands, Vincent changed domicile to Guernsey. Standing back, he was engaged in an overall exercise of migrating his financial interests from the UK.

[201]At about the same time, Mr and Mrs Moran separated, in the sense that they were no longer living in the same household. Mrs Moran and the children were at Highlands; and, although he may have come back and visited Highlands from time to time, Vincent was in Guernsey, or on his yacht.

[202]Although Vincent was domiciled in Guernsey, he set up the Blest Trust and the Castletown Trust in Jersey - ie, in a different jurisdiction - when there was no obvious reason to have done so.

[203]I find the 2002 Attendance Note a powerful piece of evidence. It dates from shortly after Vincent's death; it involves two sets of professionals, speaking candidly to each other, and there is no challenge to the reliability of the note. The Jersey professionals were in a position to authoritatively articulate the purpose(s) of the Blest Trust, and did so. It had three purposes, of which one was "asset protection from the UK Inland Revenue". I read this as meaning, keeping assets out of the reach of the UK Inland Revenue, which includes sheltering them from incidence to UK taxation as may arise. It does not seem to me that silence as to the type of UK tax involved detracts from the cogency of this note.

[204]It also records - I find, accurately - the view of Ms de Gruchy at Mourants that Vincent's movement from the UK "was purely tax and business driven".

[205]Watcher's assets and income were being received in Jersey. Part of that income was being directed, through the Watcher Loans, to maintain Highlands. UK income tax was not being paid on those amounts.

[206]Vincent had taken the decision to set up Blest as a discretionary trust with some UK-resident beneficiaries. He must have decided, for some reason, and with (as I have found) tax advice, that directing benefits to the UK-resident beneficiaries through that mechanism was preferable (for example) to simply making, as a donor, gifts of money (upon which no tax would have been payable by the recipients). An obvious reason was that assets in a discretionary trust would not have fallen as part of Vincent's estate for the purposes of UK IHT. Vincent was still a relatively young man, in his mid to late 40s, but living abroad and apart from his family in Highlands. It seems obvious to me that their financial situation would have been a matter of concern to him.

[207]The establishment of Castletown is not explained; even less the transfer of Namib from Blest to Castletown. The disclosed paperwork about this is of no assistance in giving clarification. Nor is there anything in the Castletown Instrument of Trust which assists in the motive for setting it up; "a restructure of assets" is mentioned but with no explanation as to why this "restructure" was done.

[208]Similarly, there is no explanation, and none readily deducible, as to why the pre-Castletown (Blest-only) structure or arrangements had come to be seen as sufficiently unsatisfactory so as to justify the cost and resources (and, as always, implementation risk) of setting up, and thereafter operating, Castletown. Ms Randall's evidence was that Blest's income and gains would not have been subject to tax at all, but just as if Vincent had held the assets personally: hence, on the face of it, there was no obvious need for Vincent to set up Castletown.

[209]It is clear from the Instrument of Trust that the only property to be settled in Castletown were the Namib shares: see Clause C1. The "restructure", such as it was, seems only to have involved the transfer of Namib to Castletown.

[210]It seems to me that the irresistible inference has to be that the formation of Castletown was something to do with Highlands, because the only thing put into Castletown were the Namib shares and all that Namib had was Highlands. And it seems to me that it must inevitably follow that was also something do with the tax position of the UK-resident beneficiaries.

[211]One compelling explanation, on the available evidence, is that this was driven by considerations of the income until then receivable; and so as to separate the income arising within Watcher (being held until October 2001 in Blest) from the Accommodation Benefit.

[212]The next question would be why was this done? There is no obvious reason to have done this other than to seek to argue that the Accommodation Benefit could no longer be "matched" to the income arising within Blest.

[213]I am not materially assisted by the fact that, as I see it, there is broad consensus that the structure, as it now stands, has had deleterious taxation and fiscal outcomes. For example, since 2013, Namib has been liable to pay the annual tax on enveloped dwellings (ATED).

[214]I have considered the evidence, scant though it is, that Vincent was concerned to ensure that Highlands - 'the family home' - was 'ring-fenced from any potential creditors'. This is advanced so as to suggest that the purpose was not tax-related at all, but was entirely insolvency-related. But I do not find this evidence convincing or determinative, especially in circumstances where:(1) There was no evidence that Vincent personally had ever previously been in financial jeopardy, or threatened with personal insolvency (ie, bankruptcy);

(2) There was no evidence of creditors of Vincent personally (as opposed to creditors of his limited companies) being able to lay claim to his personal assets (which would have involved, on the law at the time, piercing the corporate veil);

(3) Vincent's dealings with Highlands, and especially making the Appellant's interest ostensibly subject to the licence to occupy (as opposed to her simply being able to assert, as usual, the usual spouse's beneficial interest or matrimonial home right) was, in my view, a sham or, if not a sham in the technical sense, some form of device or contrivance to accomplish something; and

(4) It says nothing as to why Namib was transferred from Blest to Castletown; and

(5) The obvious point is that, if there were real or imagined (or even potential) risk from creditors, then this could have been at least mitigated by transferring Highlands to Mrs Moran.

[215]It seems to me that Damian Moran's assessment that his father was 'particularly motivated by concerns around asset protection, specifically to ensure that certain family assets were held separately such that they could not be accessed by creditors in the event that any of his more speculative business ventures resulted in any personal liability' really does not go beyond anecdotal or impressionistic, and is evidence which, in my view, is coloured by a filial desire to minimise his mother's tax liabilities, especially in circumstances, as he explained in his oral evidence, that Damian had, in the main, been responsible for handling her financial affairs for some time. In my view, Damian's evidence about expenditure by Namib on Highlands sought to downplay the extent - financial and substantial - of the works which were done.

[216]I reach the above conclusions having firmly in mind Mr Elliott's submissions as to the proper meaning of tax avoidance and its differentiation from tax mitigation; and the fact that disposing of one's affairs in a tax-efficient way, or taking advantage of a fiscally attractive option afforded to the taxpayer by the tax legislation, does not connote avoidance: see IRC v Willoughby and Willoughby

[1997] 1 WLR 1071

(HL) esp at 1079 B-G per Lord Nolan.

[217]Willoughby is a case on the immediate predecessor legislation, namely ICTA 1988 s 739, and concerns the taxpayers' purchase of a bond in the Isle of Man. 'Looking into the minds of the parties' (the expression used by Special Commissioners T H K Everett and Stephen Oliver QC in Beneficiary v IRC [1999] STC (SCD) 134) was possible in Willoughby since the taxpayers were all still alive to be asked, and for the evidence to be tested. In Beneficiary, the evidence of 'B' (the beneficiary) was taken and tested, and was of a much greater degree of coherence and evidential reliability than that of the Appellant (not least since B had been present at a key meeting with the settlor and his banker): see loc cit 139j.

[218]That feature alone sets those cases apart from this one, and serves to reinforce the point made above about the difficulty of this Appellant taxpayer's task when trying to discharge the burden on her.

[219]Moreover, it seems to me that the immediate scenario in Willoughby was materially different, and it was affected by what their Lordships described as HMRC's basic fallacy of regarding the taxpayers as having "in substance all the advantages of direct personal ownership without the tax disadvantages". But that is not a basic fallacy which HMRC has committed in this case; and it is tolerably clear that Vincent was not living in Highlands after 1 October 1994 (the date he gave on his DOM1 for leaving the UK). There was no reliable evidence that Highlands was (contrary to his DOM1) genuinely 'available for his use' after that date. Indeed, the thrust of the evidence (being from Damian Moran, whose evidence I accept on this point) was that Vincent was largely abroad; either on his yacht; or in the Channel Islands.

The EU Law Argument

[220]In the event, as has happened, that the Tribunal has found(i) that sections 731-33 give rise to an income tax charge in this case, and

(ii) that the Motive Defence is not available in this case, then the Appellant argues that, when subject to a conforming construction in accordance with EU law, the motive defence applies to disapply any charge to tax.

[221]Article 63(1) of the TFEU prohibits restrictions on the free movement of capital: "Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Members States and third countries shall be prohibited".

[222]HMRC argues that even if ITA ss 731-33 were to constitute a restriction on the free movement of capital, this can nonetheless be justified as a proportionate measure to prevent of tax avoidance, and to facilitate the balanced allocation of taxing rights.

[223]The burden is on the Appellant, to the appropriate standard, to show that Article 63 is engaged at all. But here there is no evidence that capital moved from the UK to Jersey. Indeed, there is no evidence before me as to where the money to fund Watcher and Blest came from; whether the UK; another Member State of the EU (at the time, pre eastwards expansion); or somewhere else instead. This carries weight in circumstances where Vincent was known to have had business interests outside the UK; and indeed outside the EU (Poland, at the time; and South Africa).

[224]Mourant's undated, unsigned, "Source of Wealth" note is evidentially useless as to the provenance of the money. It does not actually set out, with any proper degree of specificity, where Vincent's money which it was handling came from. It limits itself to a somewhat breezy comment that Vincent's wealth "in all likelihood" "originated" from his building supply businesses. There are two difficulties with this:(i) it is no more than impressionistic;

(ii) it seems to me that it recognises that wealth "originally" generated in the UK from building supply businesses (taking that simply at face value) might not have remained in the UK, but might have gone somewhere else before landing in Jersey.

[225]There is no evidence of Mourant seeking any third-party corroborative information or documents (even a bank statement) as to the source of the money being introduced by Vincent and there is no such evidence before me. I should add, simply for the avoidance of doubt, that no-one has suggested that these, or any other form of 'Know Your Client', were required in Jersey in the mid 1990s or that Mourant committed any form of wrongdoing or was deliberately turning a blind eye.

[226]But the absence of evidence, for whatever reason, cannot be ignored. In short, there is insufficient evidence to safely form a view, even on the balance of probabilities, where the money came from. That means that Article 63 is not engaged.

[227]As Article 63 is not engaged, that is sufficient to dispose of the EU Law argument.

[228]Even if that were wrong, transactions taking place after 6 April 2012 are the loans from Watcher (one Jersey incorporated and registered company) to Namib (another such company) which do not involve any movement of capital from UK to Jersey (or indeed from anywhere else to Jersey).

[229]Therefore, strictly speaking, I do not need to address the Appellant's arguments on EU law and conforming construction. I do so only, and in brief, in deference to the argument which I heard and lest my conclusion as to the above should fall for reconsideration. In case it needs to be spelled out, the following comments are necessarily obiter.

[230]The Appellant invites me to follow and adopt the decisions of the First-tier Tribunal and Upper Tribunal in Fisher:

[2014] UKFTT 804 (TC)

(Judge Raghavan and Mrs Sadeque) and

[2020] UKUT 62 (TCC)

(Andrews J and UTJ Poole). In Fisher, the discussion (UT Para [149] et seq) of whether the Transfer of Assets Abroad breached EU law was technically obiter (because it was held that the motive defence was available to the appellants: see UT Para [147]) and so formally non-binding; but, regardless of binding, nonetheless persuasive. There, it was held that it was sufficient to show that a measure was capable of restricting the exercise of a fundamental freedom; not that it had actually inhibited someone: Societe de Gestion Industrielle SA

[2010] 2 CMLR 38

at H10, following Test Claimants in the Thin Cap Group Litigation

[2009] 3 CMLR 1

. Although Fisher eventually reached the Supreme Court, this aspect of the matter was not subject to decision because the Supreme Court concluded that the taxpayers were not caught by the taxing charge on which HMRC had relied: see

[2023] UKSC 44

at [6] per Lady Rose JSC.

[231]But this was against the background - at a high level - that a restriction on a fundamental freedom(i) is permissible if justified by overriding reasons in the public interest (see the Opinion of A.-G. Kokott in Societe de Gestion at AG53), including the prevention of tax avoidance where that constitutes an interference in the allocation of power to tax between Member States; and

(ii) that the freedom granted to Community nationals is the same as that for the Member State's own nationals by the law of the Member State: see Societe de Gestion at Para [38] and Hoey v HMRC

[2021] UKUT 82 (TCC)

(Adam Johnson J and Judge Raghavan) at [254] et seq, and esp. [256].

[232]In my view, in the present case HMRC are seeking to tax the provision of rent-free maintained accommodation in the UK by an offshore company to an individual living in that property in circumstances where the amount of the charge is restricted to the lesser of the benefit provided or the income of the overseas entity(ies) providing it. HMRC's position before me is that, if a UK-resident company was seeking to provide such a benefit, then HMRC would seek to assess on the same basis. On that footing, HMRC contends before me that there is no difference in treatment with an objectively comparable situation, meaning that there is no identifiable restriction of free movement rights. Were it to be in issue, I agree with this.

[233]I also have regard to the (obiter) remarks of the Upper Tribunal (Adam Johnson J and UTJ Raghavan) in Hoey v HMRC

[2021] UKUT 82 (TCC)

at Para [320], to the effect that the transfer of assets abroad legislation must be read so as to allow, where a person is within scope of EU law, the motive defence to apply unless the person is engaged in wholly artificial arrangements as that term is understood in EU law. But, given that I have already found that there was no movement of capital, then I do not need to express any concluded view as to whether the arrangements in this case are artificial in that sense.

Quantum

[234]IT 2007 section 742E deals with the value of the benefit. This was not in force for all the years, but, I accept, was a codification of what was hitherto understood to be the approach, which was the value - or, in this case, the full market rent - of the benefit, ie Highlands - minus the recipient's contribution to the costs of repair, insurance and maintenance.

[235]There is satisfactory evidence as to the full market rent.

[236]There is insufficient evidence, even now, for me to able to satisfactorily determine, even on the balance of probabilities, what was paid by the Appellant in relation to costs of repair, insurance and maintenance. There may well have been such amounts, but, in order to have argued for these to be deducted, the Appellant taxpayer in this case would have had to demonstrate what those were, and has not. There were scraps and tatters of oral evidence from the Appellant (for example as to how payment for the gardeners and the council tax revolved between her and the trustees) but this is uncorroborated by the sort of evidence which one might ordinarily expect to see, especially when it is remembered that this is a multi-day case on the complex track with already voluminous evidence.

[237]I am unattracted by the Appellant's invitation that I should issue a decision in principle only. It can be no more than an assumption that the parties, left to it, would then be able to determine the quantum, without any further involvement by the Tribunal. It is not appropriate to proceed on that assumption.

[238]This was the hearing of a multi-day appeal, and was proceeding - at the Appellant's express request - on the complex track, normally reserved for the most challenging and complicated cases. All the evidence should have been put forward - to adopt the memorable expression of Lewison LJ in Fage UK Ltd v Chabani

[2014] EWCA Civ 5

at [114]: ‘the trial is not a dress rehearsal. It is the first and last night of the show’.

[239]In my view, that is sufficient to dispose of the matter. Even if it were not, in my view, and bearing in mind the obligations imposed on me and the parties by the overriding objective in the Tribunal's rules, it would be disproportionate to convene a further hearing, of indeterminate length, to consider evidence which the Appellant latterly puts forward.

[240]I do not see how anything other than the full value of the Accommodation Benefit, namely the full market rent, should be subject to Income Tax, and that is my decision as to quantum.

Outcome

[241]The Appeals are dismissed.

Right to apply for permission to appeal

[242]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 14th MAY 2025