In a lengthy judgment, the FTT has dismissed an appeal against an HMRC decision that a company was resident in the UK and against discovery assessments charging it to UK corporation tax on that basis. However, the FTT judged that the omission to notify changeability was careless, not deliberate and thus reduced the applicable penalties and upheld the appeal against the imposition of a personal liability notice on Mr Ciardi.
CORPORATION TAX – corporate residence – place of central management and control – located in UK – appeal dismissed – penalties – whether behaviour deliberate – no – appeal against penalties partially upheld – personal liability notice – appeal allowed
The FTT summarised the issues as follows:
“This case arises from appeals brought by Cogefin (Bermuda) Limited (‘Cogefin’) and Mr Giuseppe Ciardi (‘Mr Ciardi’) against discovery assessments and penalties issued by HMRC. The assessments relate to corporation tax liabilities for the accounting periods from 1999 to 2017, and penalties for failure to notify chargeability for the periods from 1999 to 2013. A Personal Liability Notice (PLN) was also issued to Mr Ciardi in respect of penalties for the years 2010 to 2013. … The assessments and penalties have their origin in a disclosure made by Mr Ciardi under the Liechtenstein Disclosure Facility (LDF) in June 2012. …Although the LDF report indicated that Cogefin’s central management and control (CMC) resided in Bermuda, HMRC questioned this. The report acknowledged that Mr Ciardi had, on occasion, acted beyond his authority—such as during the 2008 financial crisis when he instructed Morgan Stanley to move Cogefin’s funds into government bonds. Following a review of the LDF report, HMRC opened an investigation under Code of Practice 8 in 2014 into Cogefin’s UK tax position. These appeals arise out of the conclusions of that investigation.
HMRC contended that Mr Ciardi had exercised CMC of Cogefin from the UK since at least 1999 and issued discovery assessments and penalties accordingly. HMRC also contended that Mr Ciardi acted as a shadow or de facto director and was personally liable for the penalties under the PLN.
The appellants disputed HMRC’s contentions, maintaining that Cogefin was managed and controlled in Bermuda and that Mr Ciardi’s role was limited to that of an advisor. …
… The issues for determination are:
whether Cogefin was resident in the UK or in Bermuda during the relevant periods;
whether assessments for 1999-2013 were validly made under paragraph 41 Sch 18 Finance Act 1998 (‘FA 1998‘), including whether the relevant time limits and statutory gateways were satisfied (there was no dispute that the assessments for 2013-2017 were validly raised in time);
whether Cogefin had a reasonable excuse, whether conduct was careless or deliberate, and whether penalties were validly imposed;
whether Mr Ciardi was an officer or shadow director of Cogefin and whether any deliberate failure is attributable to him.”
Concluding on the residence issue, the FTT judged that:
“Given the content of the documents and witness evidence, we consider that the directors of Cogefin treated Mr Ciardi’s proposals as instructions and carried them out when requested to do so. … we also consider that Mr Ciardi did not anticipate that his requests would be refused … considering the pattern of evidence, we consider that in practice decision making was abdicated by the directors to Mr Ciardi rather than usurped by him: we consider that he did not anticipate refusal because direct requests were never refused, rather than because he considered that the directors could not refuse. Accordingly, we conclude that, standing back and looking at the picture overall for each period, the directors did not make the relevant decisions at the level required for central management and control to be located in Bermuda … Although there were a very few instances where the directors appeared to have made a relevant decision, we do not consider that these were sufficient to render Cogefin dual resident in the UK and Bermuda. … the directors continued to act as administrators and not as decision makers. … For this reason, we find that on the balance of probabilities Cogefin was not resident in Bermuda at any time during the periods under appeal but was, instead, resident in the UK only.”
Considering the validity of the discovery assessment, the FTT judged that Cogefin did not have a reasonable excuse for the failure and a loss of tax had arisen as a result of carelessness. The six-year discovery time limit was therefore in point and thus the assessment was made in time. Furthermore, the FTT judged that Officer Charles had “made a discovery that there was a relevant loss of tax following receipt, and consideration, of the requested further information in respect of Cogefin in November 2018, after the enquiry window expired on 31 July 2018”. The FTT therefore concluded that “the assessments were validly raised.”
However, the FTT found that “the behaviour which led to the failure was careless and not deliberate” thus “it follows that the penalties cannot stand as assessed”. Reviewing the position, the FTT concluded that the other factors in respect of the penalties had been correctly applied and thus “We find that the overall penalty percentage for each of the periods in question should therefore be 25% of the potential lost revenue. The appeals against the penalties are therefore upheld in part.”
Finally, the FTT judged that:
“Given our findings above, it follows that Mr Ciardi’s appeal against the personal liability notice is upheld: as we have concluded that the behaviour which led to the loss of tax was not deliberate, there can be no liability on Mr Ciardi under the provisions of paragraph 22(1) Schedule 41 Finance Act 2008.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/1108
Related content from Claritax Books
Discovery Assessments, by tax barrister Keith Gordon, is a detailed, clearly written guide to the law and practice in this area. Based on the author’s personal involvement in many leading cases, the book contains much practical advice explaining when and how such assessments may be challenged.
