UK and International Tax news

FTT Rejects Taxpayers Appeal in Company Residence Case

Wednesday 12th August 2026

The First Tier Tax Tribunal has recently published its decision in rejecting appeals by the taxpayer in a case involving company residence.

In Cogefin (Bermuda) Ltd & Anor v HMRC [2026 UKFTT1108] appeals were brought by a Bermuda registered company owned by an overseas family trust and the settlor against discovery assessments and penalties issued by HMRC. The assessments related 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 was also issued to the settlor in respect of penalties for the years 2010 to 2013.

With millions of pounds of tax at stake, the hearing of the appeal took place over four weeks during July 2025, with the parties subsequently making additional written submissions over the following six months. An extensive bundle in several volumes was provided, including a bundle of chronological correspondence from Cogefin’s history of over 20,000 pages which the Tribunal was required to read in detail following the hearing as part of making the decision.

The assessments and penalties were based on a disclosure made by the settlor who was also the beneficiary under the Liechtenstein Disclosure Facility in June 2012. The disclosure included a draft report prepared by BDO LLP, which was formally accepted into the LDF in September 2013. The report disclosed the settlor’s financial interests, including his involvement with Cogefin.

Cogefin was incorporated in Bermuda in February 1996, and initially funded by the transfer of approximately $7.7m of stocks transferred from the trustees of the trust. The company was established to hold and manage investments on behalf of the trust. As an exempted company under Bermudian law, Cogefin was not permitted to conduct business within Bermuda but could operate from Bermuda for international purposes. The directors of Cogefin were Bermudian-resident lawyers working for a Bermudan law firm which also provided corporate management services to Cogefin.

By 1999 Cogefin’s value amounted to around $25m, in part due to significant rises in value of technology stocks. It subsequently invested in a range of assets and was worth in excess of $250m by 2011.

The LDF report described the settlor as an investment advisor to Cogefin, and stated that the directors routinely sought and followed his recommendations on investment decisions, including the acquisition and disposal of financial assets, real estate, and artwork. Cogefin held accounts with major financial institutions such as Morgan Stanley and Goldman Sachs, and invested in hedge funds and start-ups, often based on the settlor’s personal network and expertise. The report disclosed that Cogefin had made substantial loans to the settlor and entities associated with him. Cogefin also funded the purchase and renovation of the settlor’s London residence and financed the acquisition of artwork and jewellery.

Although the LDF report indicated that Cogefin’s central management and control were conducted in Bermuda, HMRC questioned this. The report acknowledged that the settlor 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.

HMRC contended that the settlor had exercised central management and control of Cogefin from the UK since at least 1999 and issued discovery assessments and penalties accordingly. HMRC also contended that the settlor 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 the settlor’s role was limited to that of an advisor.

The FTT had to consider the following issues:

  • whether Cogefin was resident in the UK or in Bermuda during the relevant periods;
  • whether assessments for 1999-2013 were validly made under paras 41 Sch 18 FA98, within the relevant time limits and statutory gateways, (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 the settlor was an officer or shadow director of Cogefin and whether any deliberate failure was attributable to him.

After detailed review and analysis of the evidence available, the FTT held that Cogefin was resident in the UK for all of the periods under appeal as its place of central management and control was in the UK and the assessments were validly raised.

The FTT found that the behaviour which led to the penalties was not deliberate and they should therefore be reduced, although the mitigation given was appropriate.

Cogefin’s appeals in respect of residence and the validity of the associated assessments were therefore dismissed, the appeal in respect of the penalties was allowed in part, and the settlor’s appeal against the PLN was allowed.

The FTT adjourned Cogefin’s appeals for Cogefin and HMRC to seek to agree the quantum of the assessments and penalties.

Right to apply for permission to appeal was granted.

 

If you require further information on the above, please contact Keith Rushen on 0044 (0) 207 486 2378.

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