The Court of Appeal has overturned a 35 year old ruling that gave protection to trustees allowing them effectively to eradicate actions they had taken that had adverse tax consequences they had not anticipated. The rule, known as Hastings Bass, effectively gave trustees a legal “morning after pill”. The Court of Appeal ruled that if trustees took poor choices based on legal or other professional advice, they cannot turn the clock back.
This decision will cause more beneficiaries and trustees to seek redress for tax liabilities incurred as a result of poor advice through the courts. Litigation is costly and the outcome is never guaranteed.
Furthermore, trustees themselves are likely to face legal action from affected beneficiaries. If a trustee takes action in relation to a trust fund, based on professional advice, which has adverse tax consequences, it is likely those who benefit from the trust will have no choice but to seek redress through the courts.
Trustees will also seek redress for what they might perceive to be bad advice, or lack of advice, with regards tax consequences of trustees’ proposed actions. Professional advisers can expect to see an increase in claims against them.
The upshot of this ruling will inevitably mean higher insurance premiums for professional advisers and more money for HMRC.