Mark McLaughlin looks at court applications to rectify trust deeds where trusts give rise to unintended tax consequences.
Trusts can be created for many reasons, including tax planning. Whatever the reason, the tax implications of creating and running a trust need to be considered in advance.
For example, professional advice is not always obtained; or if it is, the advice might not be complete or correct. Errors or misunderstandings about the tax treatment of transfers or chargeable events could result in unintended additional tax, interest, and penalties.
However, in some cases it may be possible for the trust deed to be changed, such that the unintended tax consequences do not arise. This remedy (‘rectification’) requires court approval. HM Revenue and Customs might not approve of an application to have the