TaxPersonal TaxCourts open up tax advisers to negligence claims

Courts open up tax advisers to negligence claims

Protection afforded trust tax advisers has dissipated after new court ruling

THE COURTS HAVE overturned the protection that tax advisers received when helping clients set up tax schemes involving trusts, opening them up to negligence claims.

In the joint appeals of Pitt v Holt and Futter v Futter, the Court of Appeal overturned the protection afforded to tax advisers under Re Hastings-Bass.

In Hastings-Bass the courts had found that where an adviser had provided negligent advice, the trustee could unravel the transaction.

However, the latest ruling in Pitt found that the transactions could only be unraveled where the trustee had acted outside the scope of their powers. The new ruling found that under Hastings-Bass applications, trustees would have acted within the scope of their powers – so the transactions cannot be unraveled.

Trustees receiving negligent advice from advisers will now have to claim for damages for professional negligence.

It is not known if the decision will be appealed.

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