Some say that Court experiences are like your first day of school. At school I always worked hard, handed my homework in on time, was never late, was known as the teacher's pet and got top marks. So I was convinced that if I ever have to go to Court, I'd be alright because I knew the rules of the system.
I have been in the privileged position of not having had many Court experiences with any of my clients nor being involved in any disputes so when I had to participate in a hearing for an Asian client of mine, I was shocked at how unsettled I felt after. The tactics of the other lawyers were those of unattended bullies and there was little fairness involved; it was like whoever capitulates first is the loser, even if he is on the right side of the law.
When planning, I always advise my clients to think ahead and remember that you might have to defend yourself one day - my words when drafting or writing documents are always very carefully chosen so that they cannot be misinterpreted or to put my client in a vulnerable position.
The direction in which the world is headed now, especially with the obsession of transparency, means that undoubtedly, we are going to see a lot of litigation, a lot uncertainty and a lot of wealth structures under attack. Most disputes I've had can be sorted out with a good night's sleep, a nice glass of wine and a heart to heart conversation but that doesn't fly in Court - what was meant to be a few hours hearing turned into a 3 day deliberation over a four word email I had sent to one of the client's advisors!
A friend of mine who is a seasoned litigator called the other side of lawyers ‘lying toe rags’ and the fact that they were manipulating the truth annoyed me even more. Nobody likes being lied to, cheated or insulted but sticking to principles can be expensive.
Imagine what it must be like to receive a letter from HMRC claiming that you owe them a huge sum of money in tax, penalties and interest. The tax advice you were given five years ago, which cost you north of at least £10,000, which you followed to the letter, HMRC now claims is flawed and what you thought you had done, you had not done so now you are to be taxed regardless of the fact you had no idea you are doing anything wrong.
It is not for me to say that HMRC is abusing its powers but what I do think is unfair is that it treats legitimate avoidance taken on good advice in the same way as the deliberate evasion of tax.
The most vulnerable in the UK, I think, are the non-doms who took advice on coming to this country - costing them hefty fees! They were told to set up a trust which would take them outside the scope of income tax, capital gains tax and inheritance tax on all monies offshore - costing them another set of fees. These individuals had no intention of evading tax, they merely followed good advice for legitimate tax mitigation.
It may be in the fullness of time – that these non-doms can prove the attack against them was groundless. However, by the time they have engaged a lawyer to investigate the matter, put forward a good case, and argued it for years, possibly in front of a Judge – they may just find that what they have saved in tax they have spent in legal and court fees – that is if they win. If they lose, HMRC could wipe them out!
But, it is not as if you need to sit there like a sitting duck waiting for HMRC to catch up with you. There are some simple measures you can put in place to ensure that your trusts, whether you are a settlor or in the fiduciary business, are less likely to be investigated.
To get an independent opinion on your tax position or trust review, or discuss all matters relating to trusts, privacy, control and protection of your assets please contact us direct.
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020 3740 7423
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