Many Accountants and Tax Advisors will have a number of Trusts as their clients. They may or may not have known that the ‘Rule in Hastings-Bass’ referred to a legal defence Trustees could use to prevent HMRC collecting tax on steps which resulted in extra tax liabilities [NB: Those who thought the Hastings-Bass rule was to do with the offerings of a South Coast pub should read on to protect their PI insurance]. Effectively, the Hastings-Bass rule was used as a way to unwind actions which had unexpected, adverse tax effects. Essentially, it was a ‘Get out of Jail Free’ card.
Trusts are often misunderstood. They have suffered recent adverse publicity, but they can still serve valuable roles in protecting minors, the vulnerable and inter-generational family wealth. This is the reason many Trustees may only be involved in one Trust, and many Advisors will only have a few on their client list. Such diversity is helpful, in my opinion, because it keeps those most affected by the outcome closely involved in the decision making process. The underlying personal and commercial issues are generally more important, and those who are close can give a more balanced view, than just technical input. It does not stop the latter being important though.
This month the Supreme Court issued its judgement in Futter and Another v The Commissioners for HM Revenue and Customs and Pitt and Another v The Commissioners for HM Revenue and Customs. They were disparaging about the Hastings-Bass rule and Trustees claiming that they had acted in an ‘un-Trustee like fashion’ such that they should be able to void as a ‘mistake’ actions which gave rise to an unexpected tax bill. The Supreme Court compared such a defence with the lack of relief which would be due to an individual beneficial owner of property who may have made a similar mistake.
The Court Opinion is elegantly written but raises a number of potentially complex issues for advisors. Those who may be affected should read the judgement carefully. Perhaps the first thing which springs to mind though is that Trustees and Advisors need to protect their own interests (as well as the Trusts) by ensuring they have evidence of obtaining appropriate professional advice.