Geoffrey Richard Haworth & Ors v The Commissioners for HMRC

“Place of effective management” in a double-tax treaty is an autonomous, internationally construed concept. It is not automatically equated with domestic “central management and control”. CMC may exist in more than one place, whereas POEM operates as a treaty tie-breaker and must identify one state. POEM asks where realistic, positive, top-level management occurs. The court may examine why trustees were appointed and the role they were expected to play. Formal decisions by trustees do not necessarily locate POEM where those trustees are resident if the decisions were pre-ordained under a plan devised and managed elsewhere. Professional advice alone is insufficient. The appeal was dismissed.

The appellants were trustees and settlors of three family trusts which disposed of shares after Mauritian trustees had been appointed for a limited period. United Kingdom trustees were appointed later in the same tax year. The trusts were resident in both jurisdictions under domestic law.

The First-tier Tribunal dismissed the appeals: [2022] UKFTT 34 (TC). The Upper Tribunal affirmed that decision: [2024] UKUT 00058 (TCC), [2024] STC 436. The appellants argued that POEM under the UK-Mauritius Treaty was equivalent to domestic central management and control, applying Wood v Holden. HMRC relied on the broader approach in Smallwood. The central issue was the proper interpretation of POEM for treaty purposes.

1. Appeal dismissed. Lord Justice Newey gave the leading judgment. Lord Justice Arnold and Sir Andrew McFarlane agreed.
2. Autonomous treaty meaning. POEM has an autonomous meaning in the Treaty. It must be construed by reference to ordinary meaning, context, object and purpose, consistently with the Vienna Convention on the Law of Treaties. The construction must be international rather than exclusively English. Domestic authorities on central management and control are not determinative.
3. POEM differs from CMC. POEM is a treaty tie-breaker intended to identify one Contracting State. CMC may, in exceptional circumstances, be divided between countries or produce more than one residence. POEM instead requires consideration of what happens in both states and selection of one state. The CMC approach in Wood v Holden therefore does not automatically govern POEM. The observations in that case suggesting that CMC and POEM could not produce different answers were obiter and tied to its facts.
4. Relevant inquiry. The focus is on effective, realistic and positive management. The court may consider the circumstances in which trustees were appointed, the broader plan, the trustees’ expected role and whether their decisions were pre-ordained. The mere fact that trustees genuinely make decisions in accordance with their duties does not necessarily locate POEM where they are resident. Advice given by professionals elsewhere is insufficient by itself; the decision-makers remain central.
5. Application. The settlors and United Kingdom advisers devised, orchestrated and superintended a single plan. The Mauritian trustees were appointed for a short period in the confident expectation that they would implement it, approve the necessary steps and retire in favour of United Kingdom trustees. Their decisions were genuine but had been effectively foreseen and pre-ordained. They were implementing a script written elsewhere. The FTT was entitled to find that realistic, positive management remained in the United Kingdom and had applied no erroneous legal test. The approach was consistent with the majority reasoning in Smallwood: [2010] EWCA Civ 778.

• Court of Appeal (Civil Division) dismissed the appeal from the Upper Tribunal.
• Upper Tribunal (Tax and Chancery Chamber) affirmed the First-tier Tribunal’s decision: [2024] UKUT 00058 (TCC), [2024] STC 436.
• First-tier Tribunal (Tax Chamber) dismissed the taxpayers’ appeals: [2022] UKFTT 34 (TC).