In Whittaker v Concept Fiduciaries Ltd, Guernsey Judgment 15/2017, Guernsey’s Royal Court considered the UK rules on rectification of advisers' errors in setting up a trust.
Under UK law the courts have jurisdiction to set aside a voluntary disposition (a transfer into a trust) on the ground of mistake. Guernsey trust law also allows the courts to rectify mistakes.
Margaret Whittaker founded Slimming World in 1969 via UK limited companies.
- In 2008, she took professional advice and, as a result, transferred her shares into Guernsey remuneration trusts in order to reduce her tax exposure.
- It transpired that the transfers would actually have detrimental tax consequences.
- She applied to the Guernsey court to have the transfer set aside.
The court found that
- Whittaker’s advisors acted “without due deliberation”.
- While the motive for the transaction was tax avoidance, these were not “artificial tax avoidance transactions”.
- It relied on Pitt v Holt [2013] UKSC 26.
The court held that there was a genuine transfer of the shares into a genuine trust. This was a not uncommon remuneration structure, and would not have been undertaken if correct advice had been given. It decided that the transfers could be reversed.
The court made it clear that if this had been “aggressive tax avoidance” it would not have been overturned.
Comments
We note that on a previous occasion the court decided that rectification is not available if another remedy could be sought – for example, compensation from a professional adviser, see Rectification of Trustee Mistakes.
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