Not Mauritian enough

In 1989 the taxpayer Mr S a UK resident created the trust for the benefit of himself and his family. He had the power to appoint new trustees.

In 1994 Mr S appointed KMPG Bristol to be tax adviser to him and the trust. He also appointed a company incorporated in Jersey (used by other KPMG clients) to be sole trustee. The trust assets included the F shares and the B shares.

By 2000 the F shares were worth £6 million and in order to mitigate the capital gains tax on the sale of those shares KPMG recommended a certain tax planning scheme. This was carried out by the end of the tax year.

In essence the scheme involved the appointment of Mauritian corporate trustees who carried out the administration of the trust in Mauritius registering the trust as an...