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Two recent cases in the High Court have shed further light on the extent to which trustees will be liable for their mistakes in the administration of a trust.

The cases of Futter and Cutbill v Futter and HMRC (2010) and Pitt v Holt (2010) both give further guidance on the longstanding ‘rule in Hastings Bass’. The rule states that where the trust gives the trustees discretion as to how to act and the effect of their actions is different to what they intended due to a mistake on their part, the court will interfere and reverse any consequences if it is clear that they would not have acted that way if they had not failed to take into account all relevant factors or had taken into account irrelevant considerations.

The cases concerned mistakes made by the trustees in failing to take account of certain tax rules. The application of the rule in Hastings Bass was opposed by HMRC as it would result in less tax being payable. However, the court found in favour of the rule, which could apply where its results would mean a lower tax liability.

HMRC may appeal against the decision so it is still important for trustees who are uncertain of their requirements to seek professional advice.


Written by Andrew Hodges

April 8, 2011 at 8:23 am

Posted in Comment, LinkedIn

Tagged with , ,

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