Temporary non-UK-resident

Non-Residence: Start And End Dates For Period Of Temporary Non-Residence

The temporary Non-Residence rules distinguish between residence and sole-residence, allowing a taxpayer to rely on treaty residence despite being dual UK resident. The HMRC manual RDRM12640 The SRT provides:

“An individual’s period of temporary non-residence starts from either:

  1. the date immediately following the last residence period in which they were solely resident in the UK (referred to as period A)
  2. if split year treatment applies to the individual, the date following that on which the last residence period for which they had sole UK residence ends.

The period of temporary non-residence ends on the day before the date of the start of the next residence period for which an individual has sole UK residence.”

Treaty non-residence is defined in RDRM12630

“An individual will be Treaty non-resident at any time if, at that time, they fall to be regarded as resident in a country outside the UK for the purposes of double taxation agreements, having effect at that time.

An individual will be Treaty resident in the UK if, at the time, they fall to be regarded as resident in the UK for the purposes of double taxation arrangements having effect at that time”.

Residence and Sole residence is defined in RDRM12620

“In relation to whether an individual is temporarily non-resident, a residence period is either:

  1. a full tax year
  2. the overseas part of a split year
  3. the UK part of a split year.

Sole residence for a year includes residence when there is no treaty non-residence.

“An individual will have sole UK residence for a residence period consisting of an entire year, if they are resident in the UK for that year, and there is no time in that year when they are Treaty non-resident.”

Sole residence includes, residence for part of a split year when there was no treaty non-residence during that part of a split year.

“An individual will have sole UK residence for a residence period consisting of part of a split year, if the residence period is the UK part of that year, and there is no time in that part of the year when they are Treaty non-resident.”

To consider whether treaty non-residence would apply, consider the Greek-UK DTA

Article IX of the Greek-UK DTA, Double Taxation Relief (Taxes on Income) (Greece) Order 1954 (SI 1954/142),

(1)     An individual who is a resident of the United Kingdom shall be exempt from Greek tax on profits or remuneration in respect of personal (including professional) services performed within Greece in any year of assessment if

(a)     he is present within Greece for a period or periods not exceeding in the aggregate 183 days during that year, and

(b)     the services are performed for or on behalf of a resident of the United Kingdom, and

(c)     the profits or remuneration are subject to United Kingdom tax.

(2)     An individual who is a resident of Greece shall be exempt from United Kingdom tax on profits or remuneration in respect of personal (including professional) services performed within the United Kingdom in any year of assessment, if

(a)     he is present within the United Kingdom for a period or periods not exceeding in the aggregate 183 days during that year, and

(b)     the services are performed for or on behalf of a resident of Greece, and

(c)     the profits or remuneration are subject to Greek tax.

The DTA relies on the domestic tax rules to determine whether a taxpayer is “resident” in one of the DTA states to begin with

Underlying residence rule in Greece

Greek Taxes on personal income

The general rule considered for the determination of an individual’s tax residence status is one’s physical presence in Greece in any 12-month period.

You’re considered to be a Greek resident and liable to Greek tax if any of the following apply:

  • Your permanent home, i.e. family or principal residence, is in Greece.
  • You spend over 183 days in Greece during any calendar year.
  • You’re employed or carry out paid professional activities in Greece, except when secondary to business activities conducted in another country.
  • Your centre of vital economic interest, e.g. investments or business, is in Greece.

It appears that a taxpayer could be resident in Greece for part of a year even if they spent less than 183 days there in a Greek tax period which appears to correspond with the calendar year.

One must complete an income tax return in Greece if their annual income is over €3,000.

Even if you have no taxable income at all, you must file a tax return if you meet any of the following conditions:

  • You own a private car, a motorcycle with an engine capacity of more than 500cc, a pleasure boat or an aircraft.
  • You own a property (see below).
  • You’re a partner in a Greek partnership, limited liability company or joint venture.
  • You earn income from the letting of property or land.
  • You’re buying or constructing a building.
  • You own a swimming pool of over 25m2 (you must declare an income of at least €11,600 for an outdoor pool and at least €17,400 for an indoor pool).

Greece Guide: Income Tax Liability, Who is liable to pay income tax?: Your liability for Greek income tax (justlanded.com)

Taxable period

No taxable years other than the calendar year are permitted

Tax returns

The filing of tax returns of natural persons is effected only electronically (via the Internet).

Husbands and wives (legally married couples) up to the calendar year 2017 (inclusively) were liable to file a joint tax return, but the income of each spouse was taxed separately. However, the taxable income of one spouse from a business that is financially dependent on the other spouse is added to the taxable income of the other spouse. Taxable income of dependent children is added, with certain exceptions, to the parent who declares the higher total income. If the parents declare equal amounts of total income, the income of dependent children is added to the father’s taxable income. If there is no father, the income is added to the mother’s.Nevertheless, by virtue of L.4583/2018 as of 1 January 2018 and onward, spouses may opt to file separate tax returns, following an irrevocable statement that should be submitted to the tax authorities by the end of February of the year following the year end. In the event of separate filings, the provisions related to taxable income of dependent children apply accordingly for the parent who reports the higher income.

For the purposes of the income tax return filing (single or joint), it is mandatory that the taxpayer(s) has obtained a Greek tax registration number.

Non-Greek tax residents are required to file an annual income tax return only with the Greek tax office applicable for foreign residents.

In this respect, they appoint against the Greek tax authorities, on a basis of a proxy document, a Greek tax resident as their representative. Legal entities are not allowed to be appointed as representatives.

The deadline for the submission of the Greek income tax returns for a tax year is set to 30 June of the following year.

Greece – Individual – Tax administration (pwc.com)

Apart from the actual number of days the taxpayer and/or family spends in Greece, the other crucial factor that can be used for the determination of an individual’s tax residence is the centre of one’s ‘vital interests’.

Although the term ‘vital interests’ has not been officially interpreted within the meaning of the Greek ITC, prior provisions (in force until 31 December 2013) as well as the related jurisprudence indicate several different elements that might be taken into account by the Greek Authorities in order to establish the grounds for the determination of the above term:

  • Ownership of assets in Greece.
  • Citizenship.
  • Social security registration, either mandatory or voluntary.
  • Children’s schools.
  • Country where family resides.
  • Country where family usually spends holidays.

Notwithstanding the above, an individual’s tax residence status is also determined on the basis of the provisions of a bilateral Double Tax Treaty (DTT) concluded between the contracting states (i.e. country of origin/home and Greece) where applicable.

In principle, subject to relevant tax treaty provisions, income tax is payable by all individuals earning income in Greece, regardless of citizenship or place of permanent residence. Permanent residents are taxed on their worldwide income in Greece.

Benefits in kind are, in principle, subject to payroll withholding taxes (WHTs). However, as of 1 January 2015 and considering the difficulty in evaluating the taxable basis of such benefits at the time of their granting, no employment withholding is effected thereon. Instead, their value (since such benefits are taxable) is added to the employment income of the beneficiaries and taxed upon the assessment of their personal annual income tax return.

Greek Personal income tax rates

As of 1 January 2013, income tax depends on the source of the income (e.g. employment, rental) and is calculated accordingly.

The tax scale applying to employment income, pensions, and business profits is illustrated below. The top tax rate is 44% above Euro 40,000

from PWC: https://taxsummaries.pwc.com/greece/individual/taxes-on-personal-income

Residence in Greece or another non-UK place may be established and recognised by registration, obtaining a personal tax number and filing tax returns on the basis of being physically resent and spending all or part of a tax period there while having a main residence and centre of vital interests there.

Any period of return to the UK would be considered as a returner, a part-year, rather than as a leaver.

UK Statutory Residence Test

New UK tax residence legislation took effect from 6 April 2013. The new rules use various non-subjective factors to determine UK domestic residence status in the tax years 2013/14 onwards.

There is a summary of the main rules here:


There are tests known as automatic residence tests, sufficient ties tests and automatic overseas tests.

It is not necessary to apply either the automatic UK test or the sufficient UK ties test to an individual who falls within one of the automatic overseas tests because they are definitively non-resident for the tax year.

Also, it is also not necessary to apply the sufficient UK ties test to an individual who falls within one of the four automatic UK tests but meets none of the automatic overseas tests, because they are definitively resident for the tax year.

The tests are set out below in reverse order; Automatic UK, Sufficient ties and then finally the overriding one, Automatic overseas.

Automatic UK

An individual is UK resident for the tax year if none of the automatic overseas tests are met and the individual meets one of the following four (4) automatic UK tests below:

  1.  They spend at least 183 days in the UK in the tax year.
  2.  They have a home in the UK and are present there on at least 30 separate days in the tax year, and in a period of at least 91 consecutive days (part of which falls in the tax year) they either have no home abroad or they have one or more non-UK home(s) in which they are present for less than 31 separate days in the tax year. The days can be consecutive or intermittent for the 30-day count, and there is no time minimum for presence (so that a day is counted if there is one minute of presence in the UK home). If the individual has more than one UK home, each is considered separately for the 30-day and 91-day counts. In terms of the first limb of the test, that the individual has a home in the UK in which they are present on at least 30 separate days in the tax year, a day spent at the home is ignored if it falls in the period 1 March 2020 to 1 June 2020, the individual is present in the UK for ‘an applicable reason related to coronavirus disease’ and is resident in another jurisdiction in that tax year. Note that these days are excluded for the purposes of determining the individual’s residence in the 2019/20 tax year. The days can be excluded in 2020/21 only if the individual was non-resident in the 2019/20 tax year. Therefore, if the individual was UK resident in 2019/20, any days in 2020/21 that would fall into this provision are counted as presence in the UK home.
  3. They work in the UK over a period of at least 365 days (part of which falls in the tax year) in which there are no ‘significant breaks’ from UK work, and more than 75% of the days on which they do more than three hours’ work are days on which more than three hours are worked in the UK, and there is at least one day that falls in the period and in the tax year on which they do three hours’ work in the UK. This is described as full-time UK work (also known as FTWUK). A ‘significant break’ from UK work is a continuous period of at least 31 days during which there is no day on which there is more than 3 hours of UK work, or on which the individual would have done more than 3 hours’ UK work, but for being on annual, sick, parenting leave or emergency volunteering leave6. This means that residence by reason of full-time UK work can be avoided by a period of work abroad, but not by simply taking leave periods outside the UK. Note that in terms of ignoring emergency volunteering leave when determining if there has been a ‘significant break’, this only applies for the purposes of determining the individual’s residence in the 2019/20 tax year. The leave can be similarly ignored in 2020/21 only if the individual was non-resident in the 2019/20 tax year. The work test simply refers to working in the UK over a period of 365 days, which contrasts with the pre-6 April 2013 practice that differentiated between shorter UK work periods and those for two or more years.
  4. They die in the tax year and were UK resident under the automatic residence test in each of the three previous tax years (but the preceding tax year was not a split year), and their home was in the UK when they died, or they had more than one home and at least one of them was in the UK, and if they had a home overseas during all or part of the tax year they did not spend a sufficient amount of time there in the tax year. The individual spent a sufficient amount of time at their overseas home in the tax year if either: there were at least 30 days in the tax year when they were present there for at least some of the time (no matter how short that time), or they were present there for at least some of the time (no matter how short that time) on each day of the tax year up to and including the day on which they died. Note that the 30-day total refers to the aggregate days in the tax year, being either consecutive or intermittent. The reference to the individual’s presence at their home means at a time when it was their home. If the individual had more than one home overseas, each of those homes must be looked at separately to see if the 30-day requirement was met, and that requirement is then met if it is met in relation to each of them.

Sufficient Ties

The sufficient ties test only applies where an individual meets none of the automatic overseas tests and none of the automatic UK tests but they visit the UK and have one or more UK ties.

The test comprises two separate sliding scales that use the UK days and the individual’s UK ties in the tax year. The scale that applies depends on the individual’s UK residence status in the previous three tax years. Note that an additional UK tie (the country tie) applies to an individual who was previously UK resident.

A previously-resident individual (also commonly referred to as a ‘leaver’, but this term is not used in the legislation) can spend up to 15 days in the UK in the tax year without becoming resident, regardless of the number of UK ties that they have.

A previously non-resident individual (also commonly referred to as an ‘arriver’, but this term is not used in the legislation) can spend up to 45 days in the UK in the tax year without becoming resident, regardless of the number of UK ties that they have.

The sliding scale that applies to the tax year depends on the individual’s residence status in the previous three tax years.

the ties are:

  • family
  • accommodation
  • work
  • 90 day and
  • country
 Individual not resident in UK in the three preceding tax years (‘arrivers’) 
 UK daysResidence status/UK ties 
 45 or lessNon-resident 
 45–904 ties = resident 
 91–1203 or more ties = resident 
 More than 1202 or more ties = resident
 Individual UK resident in any of the three preceding tax years (‘leavers’) 
 UK daysResidence status/UK ties 
 15 or lessNon-resident 
 16–454 or more ties = resident 
 45–903 or more ties = resident 
 91–1202 or more ties = resident 
 More than 1201 or more ties = resident

Automatic overseas

There are five automatic overseas tests in FA 2013, Sch 45, Pt 1, paras 11–16 and an individual who meets any one of them is non-resident.

First auto o/s test, resident within 3 years. if you,

1. have been resident in the UK for one or more of the last three (3) UK tax years,

2. spent less than sixteen (16) days in the UK in the tax year, and

3. do not die in the tax year

Second auto o/s test, resident in none of the three previous tax years, the individual was

1. resident in the UK in none of the three previous tax years,

2. present in the UK for a maximum of fourty five (45) days in the tax year

Third auto o/s test, works sufficient hours overseas

  1. the individual works ‘sufficient hours overseas’,
  2. there are no ‘significant breaks’, in the current tax year, and
  3. they are present in the UK in the current tax year for no more than ninety (90) days
  4. of which no more than thirty (30) are days on which more than three hours’ UK work is done). This is described as full-time work overseas (or abroad) (also known as FTWA). Unlike the previous HMRC practice for full-time employment abroad, the legislation does not require the employment contract to cover the required period

 Fourth o/s test, dies in the tax year

  1. the individual dies in the tax year, and
  2. spends no more than fourty five (45) days in the UK in the tax year and either

 (a)     was not resident in either of the two (2) previous tax years, or

 (b)     was non-resident for the preceding tax year and the tax year before that was a split tax year under Cases 1, 2 or 3

Fifth o/s test, dies in the tax year

  1. the individual dies in the tax year,
  2. spends no more than fourty five (45) days in the UK in the tax year and
  3. would meet the third automatic overseas test rules (full-time work abroad) if those rules were applied for the part-year up to their date of death, and either:

 (a)     was not resident in either of the two previous tax year because they met the third automatic overseas test (work abroad), or

 (b)     was non-resident for the preceding tax year because they met the third automatic overseas test (work abroad) and the tax year before that was a split tax year under Case 1

International Trust Jurisdictions and Forced heirship

Trustees and beneficiaries of family trusts in common law jurisdictions are from time to time faced with claims by the “heirs” or the spouse of a settlor or beneficiary resident or a citizen of a civil law jurisdiction.

Claims by such heirs or dependents may be made under civil law of succession or separation on the basis that the “settlor” of the common law trust exceeded his or her rights, in that other civil law jurisdiction, to settle or divest him or herself of their property in their lifetime. The trustee may accordingly be presented with a judgment of a court of a civil law jurisdiction either that the property in trust was never lawfully settled on the common law jurisdiction trustee and is treated in the civil law state of situs as belonging (in rem) to the civil law heirs or spouse or that, if settled, it (or its equivalent value) must be refunded (in personam). The aim of this note is to examine how a “clawback” action of a civil law state may play out in a common law jurisdiction and what a common law trustee may do to prepare for such an eventuality. The reported experience of the English and New Zealand trustees is examined.

Trustee personally liable

A claim by a civil law “forced heir” may carry with it additional danger for a trustee. The existence of forced heirship rights in the hands of beneficiaries of deceased estates necessitates that a trustee could be obliged to compensate forced heirs for amounts exceeding the value of the trust assets held. Taking into account distributions to beneficiaries, any investment losses, trustees’ fees and expenses incurred since “settlement” and costs of defending the trust, the trustee may find him or herself personally liable to fund the difference. A trustee facing potential forced heirship problems may therefore be well advised to seek directions from his or her court of forum and suitable indemnities. He or she should not simply yield to all claims without considering the interests of the remaining beneficiaries. Similarly, however, he or she should take care not to waste trust resources defending a strong claim.  

Recognition and Enforcement

A general foreign money judgment of one state is not generally enforceable in another state without an order of the other state. This could be important where a trustee is a multi-national entity or is owned by one such as a bank and where it may therefore be possible to enforce against it or its shareholder or place it under commercial pressure in the (civil law) state where the judgment was obtained, even if the trust property is situated in another (common law) state.  The courts of the common law jurisdiction of the trust, asked to enforce such an order may be amenable to a defence on the grounds that the civil law decision is contrary to the public policy of the common law state. From the common law perspective, the inter vivos (lifetime) gifts of the settlor are not matters subject to laws of succession; even those of the laws of succession of another state. 

The EU

In the Netherlands Supreme Court HR 18 November 1998 (31 756, BNB 1999/35c, 36c, 37c) ruled that the transfer of assets by an individual resident settlor to an irrevocable discretionary trust is a transfer to an unrelated party. Gift tax is therefore payable at the top rate of tax.

Switzerland recognises trusts and accepts that a Swiss resident is free to settle property into a foreign trust, provided it does not infringe the forced heirship rules. The Swiss Parliament approved the ratification of the Hague Convention on the Law Applicable to Trust and on their Recognition on 20 December 2006 and the convention came into effect in Switzerland on 1 July 2007.

In France, the Supplementary Budget 2011 (LFR 900-2011 of 29 July 2011) has introduced a general tax regime aiming at ‘clarifying and putting an end to the existing uncertainty as for the tax treatment of trusts’. Trusts are now taxable on the settlor’s death usually at the top rate of tax especially where there is an element of discretion and distribution is delayed.

Enforcement in England & Wales

Judgments of specified former Dominions may be “recognised” according to the English 1920 legislation; of specified commonwealth and foreign (mainly European) countries by 1933 legislation. Creditors of Commonwealth, European Enforcement Order (EEO) and 2010 EFTA Lugano Convention state judgments may apply to “register” them in England under CPR 74.3. An application to set aside registration may be made under CPR 74.7 including on the ground that the enforcement of the judgment would be contrary to public policy. The statutory or convention rules permit registration of foreign judgements rather than simply their recognition as a debt entitled to enforcement by a new action and provide that the jurisdiction of the foreign court is based on reciprocity rather than comity. The foreign debtor must have submitted to the jurisdiction of the foreign court for its judgment to be enforceable in England.  An appearance in the foreign court to dispute jurisdiction is not regarded in England as submitting to the foreign court’s jurisdiction.

For specified countries, statutes apply which supersede the common law. If the judgment is not covered by a statutory provision or one of the conventions, for example a judgment of the courts of a BRIC, US, Asian or Latin American country, its effect in England is subject to common law rules. The principles of common law may be stated briefly: For a judgment to be entitled to be recognised, it must have been given in a court regarded by English law as competent. In order to be enforceable, it must be final and conclusive upon the merits of the claim, and for a fixed sum of money. 

Enforcement in New Zealand

New Zealand became a colony of Great Britain in 1841. The effect of this was the adoption of English common law and many pieces of English legislation as the law of New Zealand. This system was confirmed by the English Laws Act 1858. Initially therefore the private International law of England was the private international law of New Zealand. New Zealand has ratified few private international law conventions. One example is the 1983 Closer Economic Relations Trade Agreement with Australia in which the two countries agreed to harmonize their laws. New Zealand has a non-reciprocity based regime for the recognition and enforcement of judgements. Common Law rules apply equally to judgements of all countries. The Reciprocal Enforcement of Judgements Act 1934 allows recognition of UK judgements and provides for orders in council to permit the judgments of specific states to be recognised and registered as judgements of the New Zealand High Court. In practice very few such Orders in Council have been made.

At common law, a general money judgment in personam of a foreign Court of competent jurisdiction is regarded as creating a debt owed by the judgment creditor to the judgment debtor, on which an action may be brought in the High Court alternatively the creditor may sue in New Zealand on the same cause of action or both. Where a person is subject to the jurisdiction of a foreign Court, that person has an obligation to comply with an order made by that Court. The original cause of action on which a foreign judgment is based does not merge in the foreign judgment: it is open to a plaintiff who has obtained judgment in a foreign Court to sue on the foreign judgment itself or on the original cause of action.

If a foreign Court has given judgment on a claim for either party, and proceedings are brought in New Zealand on the original cause of action, the judgment may be relied on as the basis for a cause of action estoppel or issue estoppel by the party in whose favour the claim, or a particular issue, was determined.

Some fundamentals of the international tax system

Traditionally, the right to tax (or not tax) subjects has been the sole preserve of the sovereign and its parliament. This worked while most capital and citizens were static although freeports have existed since ancient times.

As an example, Jebel Ali was a free port long before Dubai became a modern tourism and finance centre. It was possible to form a Jebel Ali Freezone company (FZE) subject to a minimum capital requirement. A trader of commodities between Europe and Asia, for example, could buy widgets for $10.00 in Asia, sell them to their Jebel Ali FZE for $20, then deliver them to an agent in Rotterdam for $30. Only half of the sale price was exposed to tax for the contract performed at the port of delivery.

These days, the freedom of states to set their own tax rates has been restricted by pressure from international organizations. The Financial Action Task Force (FATF) was set up in 1989 to counter money laundering. Low or nil tax rates and inadequate supervision were seen as harmful practices akin to attracting the proceeds of crime. The FATF became politicized with perceived rates of wealth inequality increasing.

The rise of international dotcom business, able to trade from anywhere, gave rise to multilateral Base Erosion and Profit Shifting (BEPS) agreements permitting states to tax some transactions that would otherwise escape their domestic tax net. BEPS was known as the Amazon tax because many domestic taxes and double tax agreement rules only applied international transactions when the agreement was made in the state, there was a “dependent” agent in the state or the taxpayer had a physical presence in the state. Amazon and other dot com vendors were often outside the scope of such tax rules. The rule for the place and time of formation of a contract, was where the acceptance of an offer was posted.

The BEPS rules were in the process of being implemented when further multi-lateral agreements entered into by 130 states were entered into in 2021 known as Pillars 1 and 2. Pillar 1 allocates some taxing rights over very large and profitable multinations’, to states where they do business without a physical presence having to be established. Pillar 2 sets a minimum 15% rate of corporation tax.

In the case of individuals, capital became more mobile when exchange controls were lifted in the late 1970s. Individuals found ways to use the special attributes of individual states and territories. Some British Crown dependencies legislated for international business companies (required to trade outside their place of incorporation), with zero corporation tax rates.

Until around the 1990s, the UK had a policy of wishing to attract foreign banking and finance experts to the City and exempted them from UK tax on the income and gains of their assets retained outside the UK. This was the non-Dom rule. In general, before 2017, a individual born outside the UK would not be deemed to be UK domiciled until they had been resident for 17 of the last 20 UK tax years. Residence was assessed according to the number of days spent in the UK in a tax year. In one year, if more than half (183 days) or over 90 days on average over four years, then the UK would claim residence. Also, until 2019, a non-resident was able to buy and sell some UK assets without the gains being subject to UK Capital Gains Tax.

Employment and other active income from the UK and income from a fixed base was taxable in the UK even if it belonged to non-UK resident so, for most people, whether they are resident or not wasn’t, from a tax point of view, very important but; for wealthy mobile people, with passive income such as interest, royalties and dividends, it matters.

Generally, once a person or company is resident in a state, they may be taxable on their worldwide income. The UK exempts foreign passive income of non-doms subject to the ‘remittance basis’ rules. New Zealand and Aus don’t generally offer this exemption but they have a temporary transitional residence status, during which, passive from income is exempt.

Some international business centres such as Singapore and Hong Kong exempt the foreign income of their residents.

The UK updated its residence test in 2013. Tax rules are complex. This newsletter is not intended to be legal or tax advice. Please consult a tax adviser before selling an asset.


G7 Agree on Global Corporation Tax

On 5th June, 2021, the G7 announced an historic agreement on the reform of cross-border taxation of corporate profits.

All tax “law” is domestic law made by the governments, parliaments and sovereigns of particular states. Most cross-border corporate tax rules of individual states are however subject to the international tax treaties entered into by them.

International “law” principles generally require that the domestic tax laws of an individual state are subject to the international treaties or agreements (DTAs) that state enters into with other states. In New Zealand, the UK and other commonwealth states, treaties are embodied in domestic law by regulations made under the Income Tax Act. In New Zealand’s case, this treaty override principle is enforceable under its domestic law because the Income Tax Act 2007 s BH1(4) provides that a DTA has effect “despite anything in this Act”. See Also CIR v ER Squibb & Sons (NZ) Ltd (1992) 6 PRNZ 601 (CA) at 607.

Many DTAs are based on the OECD Model. According to the OECD Model, a company or person “carrying on” business in another state is not enough to trigger a “source” of taxable income in the other state or the other state’s right to tax the “profits” of that business.

DTA’s generally only allow a state to tax an overseas business if the overseas business has a Permanent Establishment (PE) or fixed base in that state.

Article 8(1) of the UK-NZ DTA, for example, includes:

“The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.

If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment”.

The term Permanent Establishment has a meaning specific to DTAs. The requirement for a fixed base arose from the practice of cross border business in the post World War I era. This “compromise” (requiring a PE in the source state) before the source state has a right to tax the profits of the enterprise, has been the basis of the international tax treaty network since the 1920s.

Craig Elliffe stated in his 2018 International and Cross Border Taxation in New Zealand at 17.3.4,

“A vendor of goods and services can deal with a New Zealand purchaser without any need to perform any of the actions which could give rise to business being carried on in New Zealand”.


Since around the time of the 2009 Global Financial Crash and the rise and dominance of the giant digital businesses such Amazon, Google and Facebook, the OECD has pursued the project concerned with Base Erosion and Profit Shifting as a multilateral Action Plan “designed to deal with aggressive tax planning and tax avoidance” including to prevent “treaty abuse” by permitting a deemed PE to exist and other anti tax avoidance measures.

And “This area of e-commerce and the source rules is likely to be an area of considerable tax tension and change in the next decade”.

Place of Residence

Under principles of international law, companies are considered to be resident (and resident for local tax purposes) in their place of incorporation. Some states, such as the UK, also allow place of management to determine place of residence. When directors on a company permanently live in countries other than the place of incorporation, the place of management is determined according to where the key management decisions are made. See De Beers Consolidated Mines Ltd v Howe, 5 TC 213.

‘A company resides … where its real business is carried on … and the real business is carried on where the central management and control actually abides’.

The De Beers company was incorporated in South African and its main trading operations were there. The controlling board of directors exercised its powers in the UK. The company was held to be resident in the UK.

Many states ignore place of management and tax companies based on their place of incorporation only.


With residence established, if a company earns income in another country it may be subject to tax on part or all of its income twice: by the state in which it is “resident” and possibly by the “source” jurisdiction (the state where the income is earned).

Professor Craig Elliffe’s article, Justifying Source Taxation in the Digital Age (see link below) includes:

Most theories for the justification of tax fall loosely into two major categories. These are the benefit theory and the ability to pay theory. Convention views the benefit theory as supporting source taxation, whilst the ability to pay theory supports residence taxation.

The ability to pay has been linked to the place of residence because generally a company will have one main physical presence similar to its place of incorporation.

Prof Elliffe states regarding ability to pay and residence basis taxation that: The advantage of the ability to pay theory is that it simplifies the relationship to one of compulsion which then enables the state to determine how payments can be made to allocate expenditure, distribute and secure price-level stability and full employment. Furthermore, it positively reinforces the principles of progressive taxation. This principle suggests that taxpayers suffer a burden in proportion to their income which is why it is also sometimes described as the sacrifice theory.

The benefit theory relates to other territories whether the corporation does business where under “a concept of mutual benefit or relationship”, an individual returns “to the community a portion of the economic progress they have derived from the community”.

The benefit theory became “embedded in the current international tax framework”. The so-called 1920s compromise of allocating taxing rights between source and residence countries is an integral part of the rules which form the basis of the modern international tax system and the OECD double tax model.

“Taxing rights are available to the source state only provided that the non-resident enterprise maintained a PE (usually a fixed place of business) in that state through which the enterprise’s business was carried out”.

However, “one of the most significant tax issues of the 21st century has been the ability of highly digitalised businesses to carry out economic activity in the source state without establishing a physical presence or a PE”.

G7 Agreement

The 5th June 2021 G7 announcement stated that the agreement “on global tax reform”..”will mean that the largest multinational tech giants will pay their fair share of tax in countries in which they operate”.

The agreement contains two “pillars”.

Pillar One

The largest and most profitable multinationals will be required to pay tax on their profits of doing business in the countries where they operate. In other words, establishing a PE will not be required.

Conditions applicable to Pillar One are that the firm must

  • be global and very large.
  • have at least a 10% profit margin on its turnover.

Under Pillar One, 20% of the business’s profit on operations in a particular country over 10% would be “reallocated” from the residence to the source state and be taxable in the source state.

This would require amendments to the existing DTA network.

Pillar Two

The G7 agreed that globally and country by country, corporation tax should be at least 15%.

The intention of Pillar Two is for states to cooperate on aligning their corporation tax rates rather than competing with one another to attract tax payers to relocate from one to the other. Competition of this sort has the effect of pushing tax rates down and increasing inequality within individual states.


Make a Will

I’m updating my testamentary planning.

Marriage Civil Union or De Facto Relationship

I was married about 10 years ago so I want to clearly express my intention to leave my worldly estate to my wonderful partner to enjoy and do with as he/she pleases after I’ve gone! Well, actually, he/she might be trustee of part of it for our children.

UK situated property

If I give all of my share of it to him/her including real property situated in the UK, there will be nil UK IHT on my death due to the spouse exemption applicable to married couples and partners in civil unions. Transfers of value such as lifetime and testamentary gifts between UK domiciled spouses including gifts of property held for them are exempt, IHTA, s 18.

The Transferable Nil Rate Band (TNRB) was introduced by the Finance Act 2008 (UK) & IHTA84/ s 8A-C. The TNRB permits a transfer of any unused nil rate band to the surviving spouse/civil partner’s estate. I can gift to him/her my up to the UK IHT nil rate band (NRB) (£325,000).

If I give our home to him/her on trust for our children or grandchildren the threshold can increase to £500,000. This could take a home-owning married couple’s effective NRB to £1 million. A claim to TNRB can only be made after an individual has died.

The extra NRB will apply only where the main residence (or the proceeds from its disposal) is passed to direct descendants. It is tapered for estates worth over GBP2 million.

Jointly Owned Property

Property owned jointly as joint tenants (rather than as tenants in common) will generally pass automatically to the surviving joint registered owner on death.

UK Land Transfer form TR1, in use from 1 April 1998, provides a box for the transferees to declare whether they are to hold the property on trust for themselves as joint tenants, or on trust for themselves as tenants in common in equal shares, or on some other trusts which are inserted on the form. It need not be completed unless restrictions are to be registered on the title.

The value of the deceased’s share is generally half of the net equity but the peculiarities of joint tenancy are that each joint tenant holds the whole property, not an aliquot share of it, that is, although the joint tenants are plural the law treats them as one owner. If one dies, nothing passes to his personal representatives and the property continues to be held by the survivors as before (jus accrescendi praefertur ultimae voluntati). See E Coke Institutes of the Laws of England (17th edn, 1817) p 185b; and the Administration of Estates Act 1925 (UK), s 3(4) which provides regarding real property;

The interest of a deceased person under a joint tenancy where another tenant survives the deceased is an interest ceasing on his death.

Wills Act Revocation

Any will I made before my marriage or civil union would normally have been invalidated by my subsequent marriage or civil union, s 16 Wills Act 2007 (NZ). This rule applies unless the prior will is “expressed” to be in contemplation of a then forthcoming marriage or civil union to a particular person but a will is not “invalidated” by a de facto relationship.

When a de facto relationship is entered into, generally under the Property (Relationships) Act 1976 (PRA) after three years, the de facto spouse will acquire a right to claim a 50% interest in “relationship property” including the matrimonial home but a prior will is not invalidated.

Why Make a will?

There are several good reasons for making a will. First, it is often said that it simplifies ones estate administration after death but what does that mean?

A person may have received something from someone during their life. If a partner, relative or friend put assets or investments into another’s hands and they retained “legal title” to the asset, then in general while they were alive, they would be deemed to hold the asset for the other person or in the shares that represent their financial or other contributions to the property.

If you don’t specifically provide for that asset to be held on trust or sold and distributed to them, then they would have a claim against your deceased estate. Your next of kin may not know enough about the prior gift or contribution to resolve it without an unpleasant and possibly expensive argument.

This situation might apply for example if one sibling assists another to buy a house by providing cash for the deposit. If the house is registered in the name of the sibling who was helped and then the sibling who provided the cash (donor) died, the family of the donor might be entitled to claim the deposit plus interest or the share of the asset value representing the deposit.

The rules of Intestacy

The rules of intestacy provide how an estate will be distributed under s 77 of the Administration Act 1969 (NZ) in certain circumstances for example when a husband, wife, civil union partner, de facto partner and children (issue) are left the following rule applies:

  • a husband, wife, civil union partner, or surviving de facto partner takes the Personal chattels absolutely, subject to any hire purchase agreement,
  • Residue of the estate: this stands charged with the payment to the husband, wife, civil union partner, or surviving de facto partner of $155,000 (Administration (Prescribed Amounts) Regulations 2009), plus interest
  • anything that remains of the residue is held in trust as follows:
  • a third for the husband, wife, civil union partner, or surviving de facto partner absolutely;
  • and two-thirds on the statutory trusts for the issue of the intestate

This scheme of distribution may prove to be inconvenient and insufficient for the surviving spouse, civil or de facto partner. There is nothing for grandchildren or the family of any deceased children or partner in the event that they predecease the intestate.

The Administration Act 1969 (NZ) s 77 sets out the rights to benefit in different scenarios. For example, if there are “no issue and no parents”, (issue being children of the deceased), the residue of the estate is held on trust for the husband, wife, civil union partner, or surviving de facto partner absolutely. In this circumstance, if a de facto spouse claims a grant of administration, he/she must make a PRA s 61 option B election, not to benefit under the PRA but to benefit under the Administration and may take upto 100% of the residue.

Other claims on an estate

Property (Relationships) Act 1976 (NZ)

If the deceased leaves a will which a de facto spouse is not satisfied with, then the de facto spouse must enter into an option A election but may only claim upto 50% of relationship property under the PRA. A de facto spouse may have a claim against a deceased estate under the Property (Relationships) Act 1976. After the death of a common law spouse, provided the relationship lasted the required length and was a relationship was of a couple in the nature of a marriage, the surviving spouse will have a claim normally to 50% of the deceased’s interest in the property. The survivor’s claim will not automatically provide for the right to continue to live in the property and this will normally need to be provided for in the will to require the other beneficiaries to wait for their share.

The Family Protection Act 1955 (NZ)

If you have a dependent heir and they consider that they are owed a moral duty to be provided for then the rules of intestacy might not be sufficient to achieve that. The Family Protection Act 1955 allows certain close relatives to claim an entitlement.

Law Reform (Testamentary Promises) Act 1949 (NZ)

The Law Reform (Testamentary Promises) Act 1949 enables a promise made to someone during your life to be enforced. The act enables a promise to make a will or not to revoke a term of will to be enforced.

The Law Commission 2021 Review of Succession Law

The New Zealand Law Commission has published a proposal to reform New Zealand succession rules and has put their proposals out for consultation.

Part one proposes that there “should be a single, comprehensive new Act that governs claims against estates”.

Part Two addresses the entitlements to and claims against estates. The Commission’s proposals for reform include the following:

  1. A surviving partner should continue to have the right to the same property from the estate that they would get if the couple had separated rather than the deceased partner dying. The surviving partner should be able to choose to divide the couple’s relationship property or to take only what is provided to them under the deceased’s will or in an intestacy.
  2. Certain family members should be able to claim from a deceased relative’s estate to meet their needs if they are not properly provided for in the deceased’s will or in an intestacy.
  3. People who have contributed significant benefits to the deceased or their estate but received no compensation should be able to make a claim against the estate under the proposed new Act.
  4. The rules that apply to the distribution of intestate estates should be reformed to better reflect the way most intestate people in contemporary Aotearoa New Zealand would want their estate distributed when they die. Where there is a partner but no descendants, the partner should get the whole estate, with the parents no longer entitled to a share. If there is no partner, the descendants should continue to share the estate. Where there is a surviving partner and descendants, the Law Commission has identified three options for how the estate should be shared, and asks whether this should be affected by whether the surviving partner was also the parent of the deceased’s children.
  5. Succession of taonga could be governed by tikanga Māori and not general succession law.
  6. The Law Commission ask how tikanga Māori and other shared values might be reflected in new law applicable to all New Zealanders.


diary of a civil legal aid hack

Pay day has arrived. As promised the ministry has deposited taxpayers’ funds into one’s account without many deductions or revision to the invoice form. Suddenly after around nine months since beginning the civil only provider application process, the payment makes the form filling and bureaucracy begin to feel worthwhile. This is not to belittle the satisfaction felt in being able to assist the less well off with their will and estate disputes but one needs to eat, pay bills and shoe feet.

It took from mid-August till mid-December to get an interim grant, limited for this, my first, legal aid case. My second application was far quicker and resulted in an initial interim grant permitting chargeable time just to respond to the Commission’s queries.

The first client wants her home back but suffers several disadvantages including; substantial breaches of her right to occupy an estate property held in deceased will trust, a two-year-old possession order against her, an executed eviction warrant, trespass notice, being personally bankrupt and having suffered strokes impairing her speech. The interim grant, when it finally arrived, was limited to applying for an injunction to prevent a sale of an estate property which was not quite all that I wanted but it was better than nothing.

My client could not apply through me for legal aid to apply for an extension of time to appeal the Court of Appeal because your humble servant was not and is still not an approved provider of legal aid in the Court of Appeal. One has since applied for such approval but not having appeared in the Court of Appeal at least five times in the last five years in the required capacities, one is not very hopeful that such application will be favourably considered.  

Guided by the grant and urgency being real and present, we set about arranging for the lay client to apply by originating application for a without notice freezing order. After a day of frantic template moulding in lower ground floor car shed/office, the lay client and her counsel drove across the rural North Island valley sold to settlers’ in the nineteenth century following Maori Land Court decisions authorizing individuals to do so and then crossed into the prime rolling hills confiscated in 1860 following the land wars to reach the High Court – Registry.

The counter was not happy. Yes your client may apply for an issue fee waiver. No you may not issue without a solicitors signature. Yes I will administer its oath but the layout of your affidavit is wrong, nothing but the title on the cover page. You need an affidavit as to cause of action to use this registry.

This was a low point. We knew the case against a government department for making us homeless was weak but after months of applying to be a civil legal aid provider and more months of waiting and patiently answering the Commission’s questions about the case, time was limited. A tender of the property was due to close the following Monday. Could my lay client not just ask for draft papers to be placed before the judge? This was an ex parte application! Why are you standing on ceremony? I am counsel and officer of the honourable court. Ill call the judge myself.

The registrar was having none of it. You have four days. You can get a solicitor and come back with your papers in order.

As a barrister sole, your humble servant had completed the intervention rule CPD and having previously been a solicitor and persuaded the Law Society that he/she could act for lay clients directly in “suitable circumstances”. As the stern voice behind the glass knew, at the point of issuing proceedings the circumstances stopped being suitable and a solicitor on the record. An address for service was required.

After a visit to the head office of a friendly local partner proved fruitless; how can I sign this certificate? Our mood on that bleak asphalt foot path fell further.

There was another possible trust specialist I’d bumped into at a social event. We hesitated to begin another fruitless journey. After a few steps my client recognised a firm’s name written on a sign on the path above us.

Through the chrome and plate glass doors, the place looked too expense. We rested to think on padded seats inside the facade on the ground floor and toyed with how to approach him. Call on the phone? Arrange an appointment? Would we even get to reception?  In the end I called the lift. Let’s just give it a try. We got in and I pressed 3.

As it turned out the client seemed to know the solicitor who was conveniently there in reception as our lift doors parted. We were in his office and seated within moments and he seemed to know what the case was about already. I was about to go and play golf but yes I’ll do it pro bono. I’ll retain you on the basis that you get paid by legal aid and you’ll do all the work.

While not ideal, it was enough to be getting on with. We would live to fight another day. Within another half hour or so and an exchange of email, I was holding a signed originating application and we were out the door ready to head home, regroup and face the registrar again the following day which would be a Thursday.

The rest of the story ran roughly as expected, a series of phone conferences with judges, interim freezing order, application listed for urgent trial, Christmas holidays spent in the library on submissions filed by phone email from an international airport while preparing to board, a bench found jurisdictional justification to trip up an attack on the state sponsored homelessness, a reserved decision and we were done. 

Not being an approved Court of Appeal legal aid provider, a appeal was not an option unless on conditional fees which looked like a bleak prospect.

Billing took the best part of a day between school drop off and pick. Filling these forms is a learning experience.

My first pay day was also mostly spent preparing useful background in a proof of evidence to support a reply to a case officers list of questions in civil legal aid certificate number two. This is also a housing related case but this time my client does have a number of legs to stand on and my application could not be politely described as “novel” as the first one had been.

Civil legal aid provided by a sole practitioner is hard, there is much unpaid preliminary input needed but the work is fascinating and rewarding. There is clearly unmet demand for legal services in rural areas. I’m getting valuable court experience and building an advocacy practice from scratch having returned home after decades overseas. The odd private case to help make ends meet.

If still at it in a few months and your editor permits, a further report will follow.

Yours truly,

 Tane Wahine Hackett

See more irrelevant jibberish: https://michaelreason.substack.com/

Onus of proof in breach of fiduciary duties

Once a claimant seeking to void a contract made with a defendant in conflicted self interest has established that a defendant was in a fiduciary relationship to him/her, the onus passes to the defendant to prove he/she had the claimant’s authority to act in conflict of duty and in his self interest.

Snells Principles of Equity, 25th Edition, 1960, p 25 states that agents cannot deal with their principals without full disclosure. This is an “inflexible rule”. No man acting as an agent can be allowed to put himself in a position in which his interest and his duty will be in conflict; and that no agent, in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal.

Aberdeen Railway Co. v. Blaikie Bros. (1854) 1 Macq. H.L. 461, considered, at pp. 471-472

…the general question, whether a director of a railway company is or is not precluded from dealing on behalf of the company with himself, or with a firm in which he is a partner. The directors are a body to whom is delegated the duty of managing the general affairs of the company. A corporate body can only act by agents, and it is of course the duty of those agents so to act as best they can to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into. It obviously is, or may be, impossible to demonstrate how far in any particular case the terms of such a contract have been the best for the interest of the cestui que trust, which it was possible to obtain. It may sometimes happen that the terms on which a trustee has dealt or attempted to deal with the estate or interests of those for whom he is a trustee, have been as good as could have been obtained from any other person — they may even at the time have been better. But still so inflexible is the rule that no inquiry on that subject is permitted.

Parker v. McKenna (1874) L. R. 10 Ch. 96, 118, p 124 – 125, Sir W. M. James, L.J. in the Divisional Court said;

no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal; that that rule is an inflexible rule, and must be applied inexorably by this Court, which is not entitled, in my judgment, to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that. All persons who stand in a fiduciary position must refund with interest all profits they have made by means of their position or by means of property held by them, see for example Tate v. Williamson. – (1866) L.R. 2 Ch. App. 55 (resulting in the setting aside of the purchase of property by a former trustee and manager), unless they made the profit with the “full knowledge and approval” of the persons to whom they owe the duty.

The onus on the fiduciary to obtain informed consent is stated in Tate v. Williamson (1866) at page 65 by Lord Chelmsford in the Court of Appeal; it is quite clear to my mind that the confidential relation between the parties had not terminated when the negotiation for the purchase of the property by the Defendant commenced, and that he did not then, or at any time afterwards, stand in the situation of an ordinary purchaser. This being so, the Defendant, pending the agreement, was bound to communicate all the information he acquired, which it was material for the intestate to know in order to enable him to judge of the value of his property.

In De Bussche v Alt [1873 D 53] (1877) 8 ChD 286, 311 – 312, (CA) …we think that Gilman & Co. could not, after having once appointed and allowed the Defendant to act as agent for the Plaintiff in connection with the proposed sale of his vessel, and without any authority from the Plaintiff, change the Defendant’s position in the transaction from that of an agent to that of a purchaser from the Plaintiff. All the reasons which would apply to prevent the original agent from changing his position without the assent of his principal, would equally apply to the case of the substitute, and if such a transaction were held to be valid so as to entitle the substitute to make a profit out of it, it would open the door in a variety of cases to agents, who could not themselves directly become purchasers, indirectly doing the same thing through the intervention of substitutes, and to the commission of serious frauds upon principals.

Emile Erlanger and Others v The New Sombrero Phosphate Company and Others (1878) 3 App.Cas. (HL), regarding promoters also a fiduciary as a nominee and director, 1218 Page 1229. It was the vendors, in their character of promoters, who had the power and the opportunity of creating and forming the company in such a manner that with adequate disclosures of fact, an independent judgment on the company’s behalf might have been formed. But instead of so doing they used that power and opportunity for the advancement of their own interests. Placed in this position of unfair advantage over the company which they were about to create, they were, as it seems to me, bound according to the principles constantly acted upon in the Courts of Equity, if they wished to make a valid contract of sale to the company, to nominate independent directors and fully disclose the material facts. The obligation rests upon them to shew they have not made use of the position which they occupied to benefit them selves; but I find no proof in the case that they have discharged that obligation. There is no proof that either Sir Thomas Dakin or Admiral Macdonald was aware of the price at which the property had just been brought under the authority of the Court of Chancery, nor, indeed, that they even knew that the real vendors were also the promoters of the company. And there is certainly no proof that in the selection of the directors who were to be the company’s agents for accepting and affirming the proposed purchase, the vendors used their power as promoters in such a way as to create an independent body capable of acting impartially in defence of the company’s interests. A contract of sale effected under such circumstances is, I conceive, upon principles of equity liable to be set aside.

Costa Rica Railway Company Limited v. Forwood- [1901] 1 Ch. 746 (CA), Rigby LJ at 757-759 proves an exception when authority is stated in the company’s articles and is as follows: “That no director shall vacate his office by reason of his being a member of any corporation, company, or partnership which has entered into contracts with, or done any work for, the company.” That is a very wide clause indeed. … in Imperial Mercantile Credit Association v. Coleman [L. R. 6 Ch. 558; L. R. 6 H. L. 189], which was the case most relied on, quoted, and dealt with on both sides in the present case, Lord Hatherley L.C. held, upon a similar clause, that the director in that case was not liable to account for profits made from contracts with the company of which he was a director No attempt has been made to shew that Sir A. Forwood ever did what was contrary to the railway company’s articles of association – that he ever voted or joined in any vote about the contracts. I assume, therefore, he never did vote…

Cook v Deeks [1916] 1 A.C. 554 Page 555 (PC), A resolution of a company controlled by their votes is nugatory if it purports to sanction their making a profit.

Regal Hastings v Gulliver [1942] 1 All E.R. 378, [1967] 2 A.C. 134 Page H.L Viscount Sankey The appellants say they are entitled to succeed:

(i) because the respondents secured for themselves the profits upon the acquisition and sale of the shares in Amalgamated by using the knowledge acquired as directors and solicitors respectively of Regal and by using their said respective positions and without the knowledge or consent of Regal;

(ii) because the doctrine laid down with regard to trustees is equally applicable to directors and solicitors. It is not, however, necessary to discuss all the cases cited, because the respondents admitted the generality of the rule as contended for by the appellants, but were concerned rather to confess and avoid it. They sought no authority from the company to do so, and, by reason of their position and actions, they made large profits for which, in my view, they are liable to account to the company. They could, had they wished, have protected themselves by a resolution (either antecedent or subsequent) of the Regal shareholders in general meeting. In default of such approval, the liability to account must remain…

McMaster v. Byrne [1952] 1 All E.R. 1362, 1368, P.C notwithstanding that the respondent was not acting as solicitor for McMaster in the transaction now in dispute, the confidence arising from the relationship of solicitor and client which had existed between the respondent and McMaster must be taken to have continued to be in existence.

Quoting Parker J in Allison v Clayhills (97 LT 712): a solicitor may by virtue of his employment acquire special knowledge and the knowledge so obtained may impose upon him the duty of giving advice or making a full and proper disclosure in any transaction between himself and his client …the respondent did not discharge that duty unless he communicated to McMaster all material facts within his knowledge, a description which their Lordships think would include the facts within his knowledge as to the negotiations between Sovereign Potters Ltd and Johnsons. It is also plain that the onus of upholding the transaction lay on the respondent. ….justice cannot be done without a fresh trial of the issue whether the respondent had discharged the onus resting on him by reason of the confidential relationship existing..

Boardman v Phipps [1967] 2 A.C. 46, Page 100 – Cohen LJ, Fox was the active trustee and where it is not a question of delegating authority to make binding contracts. I agree with Russell L.J. [1965] Ch. 992, 1031 that two trustees, or for that matter one trustee, can come to an arrangement with a third party which will have the effect of placing the latter in a fiduciary position vis-à-vis the trust. The question is this: when in the third phase the negotiations turned to the purchase of the shares at £4 10s. a share, were the appellants debarred by their fiduciary position from purchasing on their own behalf the 21,986 shares in the company without the informed consent of the trustees and the beneficiaries?

Wilberforce J. and, in the Court of Appeal, both Lord Denning M.R. and Pearson L.J. based their decision in favour of the respondent on the decision of the HoL in Regal (Hastings) Ltd. v. Gulliver.

In that case Viscount Dilhorne (dissenting) said If the making of the profits by the appellants constituted a breach of their fiduciary duty, they would be liable to account unless they established that they had done so with the consent of their principals. 

Upjohn LJ, (dissenting)

A solicitor who acts for a client from time to time is no doubt rightly described throughout as being in a fiduciary capacity to him but that means fundamentally no more than this, that if he has dealings with his client, e.g. accepts a present from him or buys property from him, there is a presumption of undue influence and the onus is on the solicitor to justify the present or purchase 

The onus may shift back to the Claimant for example in a partnership when there is acquiescence and delay

In Clegg v Edmondson, 8 DEG. M. & G. 785 Lord Justice Knight Bruce said J said, now what has been the conduct of the Plaintiffs, Before the termination of the old partnership they knew that the Defendants intended to apply for the new lease, if not that it had been actually agreed to be granted. They took no steps to prevent the lease being granted. From the period of the termination of the old partnership they have known that the Defendants have been working these mines and incurred expenditure upon them, and filing this bill in the month of September 1855, they have not taken a single step in prosecution of the claim which they have now set up. This conduct on their part is, I think sufficient to shift the onus of the case and throw it upon them.