As a CFO who’s structured offshore holdings for high-net-worth clients, I’ve seen the remittance basis weaponised against non-doms. But Personal Representatives of Mukesh Sehgal and Promila Sehgal v HMRC [2026] UKFTT 516 (TC)], decided April 2026, is a masterclass in how a seemingly simple loan note redemption can trigger £6.2m CGT liability. HMRC wins on situs; taxpayers escape penalties. Here’s the CFO playbook from a case that should keep Jersey structures under audit microscope.
The Setup: Succession Planning Meets Offshore Loan Notes
Mukesh and Promila Sehgal, UK residents but non-UK domiciled, built a clothing empire. Around 2005, they implemented succession planning via loan notes issued by a Jersey company. Fast-forward: they redeemed the notes, crystallising gains. HMRC assessed CGT at £4.9m (Mukesh) + £1.3m (Promila) = £6.2m total, plus penalties.
Taxpayers claimed remittance basis: gains untaxed unless remitted to UK. Key defence: loan notes’ situs was Jersey (non-UK), so gains offshore under TCGA 1992 s.275(1)(e) – ‘registered’ in Jersey register.
HMRC: No proper register existed. Just vague accounting entries, prepared late, not for public inspection. Situs = UK. Taxable.
Tribunal’s Hammer: No Register, No Offshore Situs
FTT (Judge Amanda Brown KC) dismissed appeals on liability:
- ‘Register’ requires formality: Prepared specifically for registration/inspection purposes. Jersey company’s ‘records’ – ad hoc ledger entries post-redemption – didn’t qualify.
- Evidence vacuum: No contemporaneous docs proving register at redemption. Taxpayers’ witness: ‘accounting records sufficed.’ Tribunal: irrelevant.
- TCGA s.275 strict: Debt situs defaults to debtor (UK company? Wait, Jersey issuer but redemption mechanics mattered). No register = no Jersey situs = UK taxable gains.
Result: £6.2m CGT sticks. AccountingWeb: ‘HMRC fashioned winning case’.
Penalties Overturned: Specialist Advice Saves the Day
HMRC sought 25% negligence penalties under TMA 1970 ss.95/100B. FTT cancelled entirely:
- Reasonable care: Reliance on ‘specialist advisers’ (Jersey counsel). Issue too obscure for lay error.
- Complexity: Situs precedents sparse; remittance basis nuances extreme.
- HMRC’s 10% fallback? Rejected. Full exoneration.
Partial taxpayer win, but cold comfort against £6.2m tax bill. Claritax: ‘Reliance on specialised advice’.
CFO Battle Plan: Offshore Debt Structures Post-Sehgal
This isn’t non-dom arcana – it’s a roadmap for any cross-border debt play. Lessons:
1. Registers Must Be Real (and Proven)
TCGA s.275(1)(e) demands formal registers: contemporaneous, inspection-ready. Spreadsheet? Toast. Jersey counsel letter? Get it pre-transaction, stamped.
2. Evidence or Perish
No docs at redemption = HMRC presumption wins. Audit trail: board minutes, register extracts, third-party confirmations.
3. Non-Dom Remittance Traps Multiply
Post-2017 reforms, offshore gains still remittance-tested. Loan note redemptions now high-risk without ironclad situs.
4. Penalties: Adviser Shield Holds (For Now)
Sehgal reinforces ‘reasonable reliance.’ But document advice engagement rigorously.
Broader 2026 Tribunal Landscape: Patterns Emerge
Sehgal joins April’s tribunal torrent:
- Carbon Six: HMRC procedurally barred
- Putney Power: EIS trade start clarified
- CATS North Sea: £144m cap allowances swing
HMRC win rate ~60%, but procedural own-goals rising. CFOs: pair merits with process aggression.
PE/M&A Angle: Debt-Financed Exits Under Fire?
Vendor loan notes in PE sales: check situs pre-redemption. Jersey SPVs? Formalise registers Day 1. Non-dom sellers: remittance audit now.
Quantify: £6.2m on one redemption. Scale to portfolio: material.
Final Call: Trim Sails to Statutory Winds
Azores solo taught: wind shifts fast. Sehgal’s gale: formalities first. Offshore debt without register? You’re sailing naked.
Mark Hendy
Tanous Limited | mark@tanous.co.uk | tanous.co.uk
Links: Full judgment (BAILII) | AccountingWeb | STEP | Trowers & Hamlins | Claritax | Churchill Taxation | LexisNexis | Tribunal list National Archives