By day I am a solicitor, and Head of Commercial Property at Fishers Dewes Solicitors. By night I am hoping to become a world record holder! In fact, all night and all day. Let me explain: Who: 8 members of Ashby Round Table (of which I am one) What: 25...
High Court Saves Businessman from £650,000 Tax Bill
A judge has come to the aid of a businessman who signed a trust document with the intention of saving inheritance tax (IHT) and benefiting his children – but ended up facing a £650,000 Capital Gains Tax (CGT) bill following a ‘very serious mistake’.
In an attempt to achieve tax efficiency, the businessman had established a trust to hold his business assets for the benefit of himself and his family. Share sales had seen tens of millions of pounds in cash flow into the trust. An impending change in tax legislation had imposed a tight deadline on his professional advisers to rearrange the trust’s affairs in such a way as to minimise future IHT liabilities.
An error was made in the drafting of a deed of appointment which, once signed by the businessman and his wife, had the effect of transferring certain shares to him absolutely, thus giving rise to the swingeing CGT liability. In order to avoid the consequences of the blunder an application had to be made to the High Court.
In rescinding that part of the deed which triggered the CGT liability, the Court found that a ‘distinct mistake’ had been made by the trustees and that the effect of the document did not accord with the businessman’s instructions. In the circumstances, it would be ‘unconscionable’ to leave the error uncorrected.