"IT WAS RESOLVED AS FOLLOWS: 1. The Company would accept the transfer of all the assets and liabilities of a business carrying on the business of property purchase, management, repair, advertising, letting and sales in exchange for the issue of shares in the Company to the two contributors of assets pro rata reflecting the value of the assets contributed by each. 2. The businesses were transferred to the Company wholly in consideration for the issue of such shares and there was no other consideration. 3. The businesses were to be transferred to the Company in a manner which ensured that full deferral relief was available to the transferors of the business assets under section 162 [of theTaxation of Chargable Gains Act 1992 ]. 4. In particular, there would be transferred to the Company in exchange for the issue of all the shares in the Company the equitable interests in all those properties listed in the attached schedule (the "
"1. The staff incentive remuneration trust ("
"Employee Remuneration Trust (VISTA) for Safe Investment Management UK Limited. Only asset it will own is shares in a BVI Company. The Company will own several properties.
"[Safe Investments UK] has transferred or intends to transfer 50,000 US$1 shares in [Gooch Investment] (the "
"…the last day of the period expiring 100 years from the date hereof or (if earlier) such day as the Trustee may at its discretion appoint by Deed which period shall be the applicable perpetuity period." (c) The Trustee would, during the Trust Period, hold the income of the Initial Trust Fund (as supplemented, the "
"…any Employee, any former Employee, any spouse of any Employee or former Employee, any child or grandchild (including any adopted child) of an Employee or former Employee and any Person who is considered by the Trustee in its absolute discretion to be a dependent of an Employee and all such categories shall include any Person who is already born or who is born hereafter but prior to the Vesting Day…" "
"…any Person for the time being employed by the Settlor [i.e., Safe Investments UK] (or any 75% or more subsidiary company of the Settlor and any company resulting from the amalgamation or reconstruction of the Settlor) under a full or part time contract of service." (d) On the face of it, this would appear to be wide enough to embrace all of the employees of Safe Investments UK who, as I have noted, included Mr and Mrs Bhaur. However, clause 15(1) of the settlement made clear that persons who participated in the settlement and persons connected to them (which would include children) could not have any part of the Trust Fund or the income thereof applied to or for their benefit, save that clause 15(3) made provision for the potential for payment of income to such persons. [7] (4) On a date in May 2007 that was unspecified, Safe Investments UK transferred the share capital in Gooch Investment (i.e., the Gooch Shares) to Equity Trust (BVI) Limited pursuant to a standard transfer form signed by Mr and Mrs Bhaur. This, of course, is consistent with Recital (B) referred to above. (5) So far, the documentation is all consistent with the intention described in paragraphs 28(1) and (2) above. There are, however, a number of documents that are not consistent with this intention. [8] Thus: (a) Safe Investments UK executed a letter of wishes in relation to the Staff Remuneration Trust which appears to refer to the Estate as constituting the trust property, rather than the Gooch Shares. Again, the schedule of properties is missing, but the document seems to me clear on its face. I consider that the reference to the Estate, as opposed to the Gooch Shares, is quite possibly an understandable mistake. (b) The letter of wishes – signed by Mr and Mrs Bhaur for Safe Investments UK – and addressed to Equity Trust (BVI) Limited as trustee states: "
"The Chairman reported that notice of the meeting had been given to all those persons entitled to receive the same and a quorum being present declared the meeting open: 1. It was noted that the staff remuneration trust deed constituting the Safe Investment Management UK Limited Staff Remuneration Trust ("
"7. The meeting then adjourned to allow the declaration of trust in respect of the assets listed above to be executed and, when reconvened, it was noted that the declaration of trust had been so executed by the Company and would accordingly be forwarded to Equity Trust for counter signing."
"[Mr Martin O'Toole] raised the issue of [Equity Trust (BVI) Limited's] ongoing poor service and administration in their role as both registered agent of [Gooch Investment] and trustees of the [Staff Remuneration Trust]. [Mr Martin O'Toole] suggested using Equity First Trustees (Nevis) Limited as both registered agent of [Gooch Investment] and trustee of the [Staff Remuneration Trust]. It was agreed that [Gooch Investment] would seek the assistance of [Aston Court Chambers International SA] in moving service provider from [Equity Trust (BVI) Limited] to Equity First Trustees (Nevis) as soon as practicable."
"6. The proposal before the Board was to decide if the Company has the power to establish a structure which is identical in all material respects to the Trust but is subject to the laws of Nevis (the "
"(C) For the reasons set out in the Written Resolutions dated8 February 2011 …and in pursuance of the best interests of the beneficiaries of the [Staff Remuneration Trust] and with the consent of the Original Settlor…[Gooch Investment] has resolved to settle a new trust in a different jurisdiction on terms which are identical to the terms of the first [Staff Remuneration Trust] in all material aspects and to transfer the Trust Fund to this new trust which will be called [the Second Staff Remuneration Trust] which will incorporate a Nevis registered limited company called [Stratton 17]…to perform the same function as [Gooch Investment]; (E) It is the intention of [Gooch Investment] that this Trust qualifies as an "
"I would like to book you a conference call to talk with James O'Toole to discuss this further."
"There are several different solutions available depending upon precisely which type of RT your business has in place and your Affected Structure. We will advise which solution is appropriate for your business on an individual basis. Features of the solution Whichever variant is appropriate for your business the solutions will have the following common features and benefits: 1. The entire value will be removed from your Affected Structure and placed in a structure which is not affected by the change in legislation (the "
"This Trust is established for the purposes of holding the shares and other securities issued by the Company and to deal therewith in all respects as if beneficially entitled thereto."
"(a) the Initial Property; (b) all property hereafter paid, transferred to or otherwise placed under the control of and accepted by the Trustees as additions to the Trust Fund and in respect of which a memorandum signed by the Trustees shall be conclusive evidence; (c) all income which shall be accumulated by the Trustees and added to the capital of the Trust Fund; (d) the money and investments and other property from time to time representing the Initial Property and the said additions and accumulations."
"Equity First (Trustees) Nevis Limited, a regulated trust company incorporated in the Federation of St Christopher and Nevis with company number 03/2009 and having its registered office at Hunkins Plaza, Main Street, Charlestown, Nevis, West Indies, acting solely in its capacity as trustee of The Stratton Commercial Protection Purpose Trust (Number Seventeen) (the "
"The Transferee [i.e., IVM PCC] acknowledges that it shall hold the Assets on behalf of the Company in a fiduciary and representative capacity."
"So long as [Safe Investments UK] is a valid ongoing commercial concern, it is sensible not to dissipate so much of the capital of the trust as to remove its value to the Company going forward. Our internal approach is to preserve the capital but payout the growth on trust investments unless/until the business comes to an end or there are other extenuating circumstances. This usually equates to employee payments of between 2-3% per year approximately. Given the length of time which has elapsed since we took over the management of this trust and the fact that no benefits have been made payable to any employee as yet, we are considering allocating 10% of the trust capital immediately to eligible employees. This can take the form of capital payments to reward third party employees and monthly income payments to employees connected to the shareholders. According to the information we have on file, the following people are connected employees/directors: We hold no information on unconnected employees. Unless there is information of which we are unaware (and subject to your responses to this letter) we will shortly pass a trust resolution to make payments as follows: These payments constitute income benefits because they are designed to cover all years since 2007 when income benefits were not paid. They will be clearly referenced to be made as a reward for services rendered to the Company in the relevant trading year. As Trustees, we think a monthly repayment to each senior employee of£1,000 pcm is appropriate historically. Multiplied by 12 months each year and broadly 10 years since the creation of the trust, these are the figures that result (before pro rating). In addition, these payments will be ongoing. Moving forward however, they will be increased to take account of inflation since 2007. Each connected employee will be paid the inflation adjusted equivalent of£1,000 per month. These awards taking account third-party employees we'll also make provision for once we receive their details from you. The provision of these rules may well require liquidation of some trust assets. We will keep you appraised of this."
"Our client would note that they do not have recollection of being advised by Aston Court Chambers LLP at the point of creation that benefits "must be paid to employees" in the context referred. Our clients are well aware that any benefits provided by the Trust must be permitted by the Trust Deed and, therefore, would be to employees or beneficiaries as defined by reference to them. However, there was never an intention that the Trust Funds be paid out in the short term. The Trust was intended to be a long term structure. … Our clients agree with your view that it is not sensible to erode the capital value of the Trust so as to remove value going forwards. They not the proposal that investment growth be distributed. However, in the circumstances, this would effectively erode the Trust capital. The proposal is to allocate£480,000 of Trust Capital to be distributed to 4 named beneficiaries. This will require the sale of property in order to realise the funds required. Our clients, who are knowledgable with regards to the Trust property, consider this to be a poor investment decision. … By making the proposed distributions, a substantial proportion will be payable to HMRC as tax and national insurance. The beneficiaries currently have other sources of income which utilise their tax allowances and lower tax rate bands. A distribution at this stage would therefore erode the Trust capital and provide little benefit to the beneficiaries. They have no need or desire for the proposed distributions and strongly object to the proposals. … The Employee Benefit Trust was established to provide a long term structure to provide for future benefits for Employees. The Company considered other options at the time of its creation and the reasoning behind the Trust would be that it could provide a long term structure, with future rewards being made when the employees were no longer rewarded directly by the Company. There is no requirement for that at this stage. The proposal to allocate£120,000 to key individuals is counter-productive as they would then be demotivated to work for direct remuneration. This is contrary to the commercial purpose of the Trust."
"…The Official Receiver is concerned to ensure that any lawfully constituted trust is protected and not set aside unless there is a valid basis under the applicable governing law. By making this statement and providing available documents…the Official Receiver acts to assist this Honourable Court in its deliberations by ensuring that relevant information in the Receiver's possession is made available."
"8. Aston Court…operated a scheme known as the Asset Liberation Solution (the Solution). This scheme involved setting up and employee benefit trust (EBT) for the purpose of incentivising and remunerating employees. If operated lawfully for that purpose, the Solution was capable of sheltering assets placed into the trust from capital gains and inheritance tax. 9. However, the solution could not lawfully be used to shelter assets from such taxes by putting them offshore for the benefit of their original owners, under the guise of incentivising and remunerating employees." (2) In effect, the Scheme was capable of being promulgated for lawful purposes, but it was an unlawful (tax evasive) scheme if not used for those purposes. The Scheme was, however, represented as suitable for the Claimants and Aston Court was represented as being expert in making a representation of that kind. [22] These statements were neither correct nor true, [23] and were made dishonestly. [24] "
"Aston Court…subsequently provided false explanations of the Claimants' motives for entering into the Solution without having any basis for believing those explanations to be true. The persons who wrote these communications knew that the Claimants' purpose was inheritance tax planning, since that was the only purpose which the Claimants' ever communicated to Aston Court. It is to be inferred that they wrote these communications with [the Third Defendant's] knowledge, encouragement or assent because he wished to provide a written record of fake purposes (staff incentivisation)…"
"The gravity of the mistake must be assessed by a close examination of the facts, whether or not they are tested by cross-examination, including the circumstances of the mistake and its consequences for the person who made the vitiated disposition. Other finding of fact may also have to be made in relation to change of position or other matters relevant to the exercise of the court's discretion...The injustice (or unfairness or unconscionableness) of leaving a mistaken disposition uncorrected must be evaluated objectively, but with an intense focus...on the facts of the particular case."
"(1) There must be a distinct mistake as distinguished from mere ignorance or inadvertence or what unjust enrichment scholars call a "misprediction" relating to some possible future event. On the other hand, forgetfulness, inadvertence or ignorance can lead to a false belief or assumption which the court will recognise as a legally relevant mistake. Accordingly, although mere ignorance, even if causative, is insufficient to found the cause of action, the court, in carrying out its task of finding the facts, should not shrink from drawing the inference of conscious belief or tacit assumption when there is evidence to support such an inference. (2) A mistake may still be a relevant mistake even if it was due to carelessness on the part of the person making the voluntary disposition, unless the circumstances are such as to show that he or she deliberately ran the risk, or must be taken to have run the risk, of being wrong. (3) The causative mistake must be sufficiently grave as to make it unconscionable on the part of the donee to retain the property. That test will normally be satisfied only when there is a mistake either as to the legal character or nature of a transaction or as to some matter of fact or law which is basic to the transaction. The gravity of the mistake must be assessed by a close examination of the facts, including the circumstances of the mistake and its consequences for the person who made the vitiated disposition. (4) The injustice (or unfairness or unconscionableness) of leaving a mistaken disposition uncorrected must be evaluated objectively but with an intense focus on the facts of the particular case. The court must consider in the round the existence of a distinct mistake, its degree of centrality to the transaction in question and the seriousness of its consequences, and make an evaluative judgment whether it would be unconscionable, or unjust, to leave the mistake uncorrected."
"in some cases of artificial tax avoidance, the court might think it right to refuse relief, either on the ground that such claimants, acting on supposedly expert advice, must be taken to have accepted the risk that the scheme would prove ineffective, or on the ground that discretionary relief should be refused on grounds of public policy": [135]; (11) It is not pointless, nor is it acting in vain, to set aside a transaction and to remove a liability to pay tax, even where that is the principal, or the only, effect of the settling aside: [136] – [141]."
"12 It follows that by late 2006, I and my wife were considering seeking specialist tax and estate planning advice in order to minimise the liabilities our family may face in the event that I (or my wife) passed away and given my ill health, this was very much a factor for the steps we were looking to undertake. 13. I recall that I was a subscriber to a mailing list (www.netrent.co.uk), which was a company who operated with the private rental sector and one specific 'newsletter' had referenced the ability to utilise a legal method of reducing the burden to our children (in respect of Inheritance Tax) and to prevent a portfolio of properties from being split up in the event of death and/or marital dissolution. 14. As this interested me, insofar as I can accurately recall, I took the steps to make initial enquiries with Net Rent about this scheme. I recall that I spoke with Hazel Headley who confirmed that it was a product being marketed by a separate company, but that she would take my details and passed them on. 15. On6 November 2006 , I was contacted, by telephone, by David Breeze who introduced himself as a Partner in Aston Court Chambers ("
"1.1 Aston Court Chambers Solicitors and Aston Court Chambers LLP ([Aston Court]) are specialist boutiques providing innovative legal and commercial solutions to the challenges faced by businesses and business people in today's world. 1.2 The purpose of this report is to set out for your consideration our initial proposals for the commercial solutions that [Aston Court] would recommend based on the information that you provided at our recent meeting. 1.3 The report will also set out summary information on how these solutions work, the benefits that they bring and the fees associated with their implementation. 1.4 Fees come in two parts: 1.4.1 Arrangement Fees which are based on the type of transaction being considered and are used almost entirely to cover the costs (including 3 rd party costs) of implementation. The Arrangement Fee is expressed as a fixed monetary amount. 1.4.2 Success Fees which may either be fixed or based on the size or effectiveness of the transaction and which contribute to [Aston Court's] profitability. ... 1.6 Importantly, the proposals are based on the information that you provided to us and, consequently, our proposals may be subject to amendment if this information is inaccurate. The information upon which these proposals are based is, therefore, set out in the next section and you should check this first to ensure that we have accurately understood and recorded your position."
"1.7 The solutions offered by [Aston Court] are based upon our understanding of current UK law and practice which may be subject to amendment at the discretion of the government or, indeed, Her Majesty's Revenue and Customs (HMRC). We are unable to take responsibility for any such changes nor indeed for any expenses that you may incur as a result of such changes. 1.8 Notwthstanding the above paragraph, if a solution proposed by [Aston Court] fails to meet the specific objectives for which it was implemented then [Aston Court] will not charge (or will reimburse) the Success Fees."
"3.1 The various solutions developed by [Aston Court] are designed primarily to protect from potential future creditors (1) the private or commercial wealth that you have built up over time or (2) the income that you are generating. 3.2 A secondary, but important, aspect of these solutions is the personal control that you either retain or, indeed, in some cases, the personal control that you actually obtain in relation to these funds. 3.3 These objectives are achieved by transferring the targeted wealth or income from your private or commercial hands into specific types of Trust from which you and your family can continue to benefit. You will control these funds but, importantly, you will no longer be the legal owner of the funds. It is the removal of the legal ownership from your hands that provides you with the protection that you are seeking. 3.4 There are a wide variety of trusts that are available and a number of these can meet the stated objectives above. However, because of the specific expertise that we have in Aston Court Chambers, the trusts that we set up are always based in offshore jurisdictions, which means that they can also carry additional tax benefits that are not available through the alternatives."
"4.2.7 The management company now controls the assets and has unrestricted investment choices under the control of the directorship. 4.2.8 Cash can be accessed in a tax efficient manner. 4.2.9 Access to the assets held within the Trust can be passed down the generations without triggering a charge to Inheritance Tax. Since the Trust has a life span of 100 years, this can normally benefit 3 or 4 generations. 4.3 We have obtained formal QC's opinion on the statutory reliefs that enable the transfers to take place at the assets' acquisition prices (thus avoiding any triggering of a tax charge at the point of transfer) from John Tallon QC of Pump Court Tax Chambers... 4.4 The transacting solicitor for the above steps is James O'Toole, whose practising certificate is included as an appendix to this report."
"The favourable tax treatment did not apply, subject to exceptions, if the trust permitted the trust property to be applied for the benefit of four groups of persons: (a) A person who is a participator in the company making the disposition; (b) Any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which, but for section 13, would have been a transfer of value; (c) Any other person who has been a participator in any such company in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company; (d) Any person who is connected to any person within (a), (b) or (c)." (5) It is unnecessary – indeed, undesirable – to explain the tax regime in any greater detail. What is clear – and was common ground between the parties – was that: (a) Mr and Mrs Bhaur were participators in Safe Investments UK as they each owned 50% of its issued share capital. (b) Mandeep and Baldeep were connected with Mr and Mrs Bhaur, being their sons. Accordingly, the Bhaur Family were excluded from benefit, save that the legislation permitted a power to "make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident". [72] (6) At the time when the First Staff Remuneration Trust was established, there was a view that once the participators had died, those who had been connected to those participators when alive, would no longer be connected persons and could benefit under the trust. In other words, on the death of Mr and Mrs Bhaur, Mandeep and Baldeep would no longer be excluded from benefit. This view, although once perhaps tenable, now no longer is. Barker v. Baxendale Walker was a professional negligence action concerning the advice that should have been given by a solicitor advising a client in relation to an employee benefit scheme. In order to ascertain whether the advice was or was not negligent, Roth J [73] and the Court of Appeal [74] had to consider the true construction ofsection 28 of the Inheritance Tax Act 1984 , which contains similar (although not identical wording) to section 13 (which is the relevant provision for these purposes). At first instance, Roth J held that a person who was connected with a participator during the participator's life would not be connected after the participator's death and would, therefore, not be prevented from benefit after that death. [75] This construction was rejected on appeal, so that once a person had been connected to a participator, they could not at any time benefit from the trust. As Asplin LJ noted in the Court of Appeal, Roth J's construction is not particularly plausible: [76] "
" Your instructions You have instructed us to: Incorporate your current business Transfer the goodwill from the old business to your new company Consider the staff incentive needs of the company Draft a Remuneration Trust (RT) into which company proceeds can be paid for the benefit of current, past and present employees of group companies Consider the various methods by which the RT can benefit your staff and advise thereon Advise generally with regard to the commercial and staff incentive uses such trusts can be used for Advise generally in relation to all relevant side effect and consequences of our staff incentive advice Advise generally in relation to business succession and estate planning This advice will be relayed to you in both written and oral form during the course of our engagement. Communication We understand that our prime contract will be [Mr Bhaur], although there may be other individuals (as instructed by you) who will instruct and work with us during the course of this engagement. We usually conduct much of our communication by fax and email. Email is not fully secure and may be intercepted by third parties. If you do not wish us to use email or fax, please let us know."
"Under the principle of legal professional privilege, communications between clients and their lawyers may enjoy special protection from later disclosure in litigation or in other circumstances. A necessary element of privilege is confidentiality. Legal professional privilege can therefore be lost if advice is circulated beyond the original recipient. This is a complex area but our general advice is that you and anyone else involved in this matter should treat all information and communications relating to it as confidential and avoid circulating them more widely than necessary."
"No worries. What happened to Saturday when I thought we arranged to meet up, I pooed over to Avebury Avenue twice and spoke with Dad, and rang the house in the evening. We need to be a bit firmer on dates/times agreed. 1) AGM telephonic meeting was promised, basically got to say that this was mentioned in an email dated XX/XX/2009 from Martin O'Toole [Dad: can you get the exact email and date on this one] . Adding properties, etc, will come from this meeting so let's not raise it at this stage. 2) Need to be a bit more specific on the landlord exemption certificate, as we had an email from [Aston Court] suggesting an alternative rental agency structure at particular %. Dad also did some digging on the withholding tax confusion that we thought we were getting from this exemption certificate and it turned out it wasn't everything it cracked up to be. [Worth getting up to speed on reading these emails in the Safe Investments account before we meet up to save time when we write the email to them.] I called Lawrence Tate asking him to provide me with a simple worked example of what we were promised in the original set up of the trust, and this new option that was being presented to us. He tried to explain but accepted he was not around for this history, so suggested to call Matthew. I tried to call Matthew a couple of times in June and he never got back to my messages I left on his voicemail. 3) Another important one is the engagement of Ritchie Cooper accountants for Safe Investments now for our next year end. I spent a lot of time sorting out what was essentially our crap accountants being muppets and getting them to talk to each other (nothing technical was ever the issue) but we also agreed a fixed fee in principle with them which is a similar amount to what we ended up paying in Leicester, (But I reckon we can get them to come here.) If we do go to York as a last resort then let's combine it with this too." (b) In an email dated20 April 2011 , Baldeep wrote to persons at Aston Court in the following terms: "
"Dear Baldeep Thank you for your email dated15 April 2011 , attached below. When the trust was created, it was fit for the following purposes, for which it was designed: To incentivise and reward the employees of Safe Investment Management; and To hold assets (which were previously owned by Safe Investment Management) outside of the scope of UK taxation. In this respect the trust continues to be fit for purpose. In achieving the first point, the trust will need to have regard to the "disguised remuneration" provisions. However, the purpose itself is not incapable of being fulfilled and the normal business activities of Safe Investment Management are not affected by either the trust or the new "disguised remuneration" legislation. In terms of the provisions themselves, [Aston Court] cannot be held responsible for any changes in legislation. Would like a chat about this in a telephone call. It is true that the opportunities for tax-free investments have been reduced as a result of the "disguised remuneration" legislation. This simply means that more care needs to be taken when Gooch IML makes investments to avoid any tax charges. It was made clear from the outset that our business model was simply the purchasing, selling and renting of properties as its primary objectives, hence property being a tax free investment is extremely important to us. In this situation, you are saying that more care may be required in the purchase of investments. We only purchase property , so struggling to see how our business objectives can be achieved if tax charges do arise, which was not the case when we embarked on this trust structure. The rental income belongs to Gooch, which is generated by assets (property) that it owns. If it cannot purchase more assets with these monies without a tax charge then this puts the value placed on our product into question. However, once again, it is clear that this does not prevent the normal business activities of Safe Investment Management from being carried out. I hope this is clear…"
" Week three This is when we can begin work on the staff incentive structure we discussed. During this week, we will draft the trust and all the board minutes, etc required for the company to formally establish the trust. These documents will be sent to you in order for you to hold another board meeting and execute the trust. The trust will then be sent to the trustees for them to execute the document also. Week four Discussion will take place within the company as to how the company wishes to fund the trust. We have discussed using assets belonging to the business to do this. Assuming the trust is funded through the contribution of assets we will need to draw up the documentation to effect this. A further board meeting will need to be held to execute these documents. … Week 7 The "bible" of documents will be sent to you for your records along with contact numbers for the various lawyers and trustees should you need to contact them."
" TAXATION ADVICE: FEE GUARANTEE [Aston Court] has advised Safe Investment Management UK Ltd (the "
"1. Wind up your structure. This would occur where you feel that the structure has served its purpose and now really only acts as an overhead. 2. Retain your structure as it is but transfer this to alternative Trustees and service providers. This would occur where you were not happy to make the suggested changes and wanted to keep your structure as is. Since this is against our advice we will not be able to continue as your trustee and service provider but will assist you in finding a suitable replacement. 3. Remain with Aston Court and make the appropriate changes. This is naturally our preferred option."
"Further to our exchange of messages earlier in the year, James [O'Toole] has asked me to update you on developments. HMRC have replied to our letter in April meantime and regrettably their specialist Trusts and Estates office are continuing to refuse to accept our approach to the interpretation of section 86(3) [Inheritance Tax Act 1984 ] which we rely on to relieve [Inheritance Tax] in regard to the transfers into the trust. We await to see how HMRC will go forward with this, but it does look at though we are moving towards a contentious situation. ..."
"[Mr Fernyhough] telephoned [Mr Bhaur]...at approximately 2:00pm, as requested to discuss the position as referred to in his email dated 7 September. [85] [Mr Fernyhough] opened by explaining that he was a Tax Consultant employed by [Aston Court] and had been assisting James O'Toole with correspondence relating to the HMRC enquiry. [Mr Bhaur] said that the situation that [Mr Fernyhough] had reported was obviously of concern and he wanted to explore the ramifications for the company. [Mr Fernyhough] said that the position was the [Aston Court] had drafted the EBT at the relevant time to rely on provisions in the Inheritance Tax Act which provide for relief on transfers into trusts for the benefit of employees. [Mr Fernyhough] explained that a good deal of correspondence had passed with HMRC over the months but that they were not accepting [Aston Court's] interpretation of the relevant provisions in sections 13 and 86 IHTA 1984. [Mr Fernyhough] explained that HMRC in effect say that the trusts fall outside the relieving provisions because at relevant times the Participants (who were excluded from benefit under the trust – properly in order to ensure that the arrangements did not infringe section 13) outnumbered other employees. [Aston Court's] view is that the to ignore the provisions of the trust deed was wrong and that [Aston Court's] understanding of the legislation is that the trust qualifies if the provisions are drafted in such a way that they allow all or most of the employees to benefit as a class. In essence, there was a difference of opinion about the way in which the legislation should be interpreted, there was no dispute about the facts as [Mr Fernyhough] understood matters. [Mr Fernyhough] explained that he anticipated that HMRC may well now move to make a determination which would lead to IHT becoming chargeable under the Inheritance Tax Act provisions. [Mr Fernyhough] said that if that happened, although he could not pre-empt [James O'Toole's] views and future discussions, he assumed that [Aston Court] would advise Safe Investments to pursue the appeal and to test the issue under the relevant dispute resolution procedures. ... [Mr Bhaur] said that the arrangements were set up on the express assurance from [Aston Court] that the transfer into the Trust wold escape and IHT charge. That was the only reason for effecting the arrangements. [Mr Bhaur] said, after more further discussion, that he would appreciate a note from [James O'Toole] advising on the position at the moment and what [Aston Court's] advice would be if HMRC did decide to make an assessment. [Mr Bhaur] said that [Safe Investments] would wish to have [Aston Court's] clarification and guidance on the course of action as to how they would advise dealing with the situation if the IHT relief is not available. Is there a Plan B? [Mr Fernyhough] said, without wishing to pre-empt discussions, that [James O'Toole] would almost certainly wish to test any legal issue arising on the notice of determination. However, he would discuss this with [James O'Toole] in his next update meeting with him in the next week or two and then a response would be sent. [Mr Fernyhough] thanked [Mr Bhaur] for his help."
"...this still leaves open the existing argument in favour of you and the companies that the transfers into the trust are covered by the legislative concession in sections 13 and 86 IHTA where dispositions are made by certain companies for their employees. As I have explained HMRC do not accept our interpretation of the legislation on this point, which disagreement I believe is now likely to lead to the department issuing Notices of Determination to tax under the Inheritance Tax legislation. In the event of such a determination, the next steps will be to consider whether to pursue and appeal against this. With respect, I trust I did not suggest that we would advise you not to appeal on this argument, conversely my note of our conversation is that I said that [Aston Court] would probably advise you to test this legal issue."
"Confirmation that the trust structure set up by Aston Court is not impacted by the inheritance tax implications cited in the email correspondence from Nick Fernyhough dated 14 September and 10 September. (Naturally, this has caused us grave concern.) James O'Toole showed us the page within the deed and accepted the action of challenging the HMRC on this point. In the very rare event that this is unsuccessfully challenged and IHT had to be paid the Bhaur Family will be entitled to a full refund of fees paid."
"11. [The First Staff Remuneration Trust] resulted in a disastrous tax position discussed below. 12. However, the trust (if it is not rescinded) involved much more than a disastrous liability to tax. It involved transfer of control of the claimants' family wealth to a discretionary trust with beneficiaries including strangers and charities, controlled by [Aston Court], who were personally dishonest and professionally disloyal. This was a complete mismatch to the claimants' intentions and expectations."
"Any residue of sale proceeds i.e. profit does not belong to you or [Mrs Bhaur] any more and nor does it belong to Safe Investment Management UK Limited. Such monies belong to the remuneration trust or, more properly, the company the trust has incorporated to hold such funds on its behalf. Furthermore, there is an obligation on you and [Mrs Bhaur] to ensure these sales proceeds are paid to the trust as soon as possible after the sale. You simply have to instruct your lawyer to send these monies direct to the BVI company bank account. They will ask you for a written instruction to do this and they may ask us to explain why the monies have to be remitted to the BVIs. If they do, we will write to them to ensure they understand why they need to send the monies to the BVIs."
"I have spoken to most of you during the last week or so with regard to the final limited company accounts. I'd like to use this email to set out the current state of play. The first draft accounts did not reflect the transfer of the property into the limited company and then the subsequent transfer out. Unfortunately, we were't aware of this structure and had simply assumed that the property when straight to the trust. I have spoken to Ritchie, who provided us with some disclosures and notes that we didn't need to "journal" the entries into the account, i.e. show the property coming in and the corresponding entries in the share premium account. As with any significant or new work, we put the accounts to a consultancy that provides hot reviews for us and they have concerns about not effecting the property journals. Admittedly, they have not seen all the trust documentation so, frustratingly, they have not given a specific guidance on what they recommend we would do. Ritchie – apologies for not coming back to you on this before this email. I only found out yesterday and I thought it would be better to send a general email to all as I know we all want to get the accounts finalised. In summary, we're in a position where we can't sign off the accounts because our consultants are expressing some different opinions over the disclosure (which may be completely unfounded due to lack of documentation). We don't have the knowledge or expertise in trusts so we are relying on yourselves or our consultants to guide us through – particularly, as we weren't originally aware of the section 162 and section 239 transactions. To finalise the accounts, I either need specific instruction from you as to the specific journals and disclosures, or you take the accounts (and files) from us as they stand and complete the final disclosures from your practice. My personal opinion is that the latter option would be quicker as we would still need to go through the hot review again and they may require full documentation or certainly the rationale of disclosures and journals. I apologise if we appear to be stalling the process, but I'm sure you can understand our position."
"We spoke last week about your recent meeting with [Aston Court], which you felt was a positive step forward... On a separate matter, you were advised that [Aston Court] are asking their clients to appoint existing trust funds on broadly similar terms. On the assumption that the original trust is of the type we believe it to be (namely that it meets the conditions for certain tax reliefs) then an appointment to a new trust on the same terms should not be too controversial. This point is made with the clear understanding that we have not had sight of the trust deeds to be able to advise on whether either meets those conditions or not... ...You mentioned that it is possible to select an alternative to [Aston Court] to stand as Protector. We discussed that the Protector role is intended to provide some measure of safeguard against the Trustees acting inappropriately and, as such, it makes sense for this to be a third party. I mentioned that many of our clients ask a longstanding adviser to take this role, or a family friend. I have not yet had an opportunity to confirm with the Partners here whether Powrie Appleby could stand as Protector (or whether there are any regulatory reasons why we could not) but we are looking into this and I will let you know as soon as I have found out! ... Finally, you asked me to confirm that Powrie Appleby would be able to assist in dealing with the ongoing administration of the Trust and we discussed that this may involve acting as a coodinator with [Aston Court], the Trustees and the Protector (yet to be identified). I can confirm that this is fine and, as we briefly discussed, would be charged at our usual hourly rates."
"The terms of the enagagement were to incorporate a property business, and then to onward settle properties into a Remuneration Trust set up for the benefit of employees. There has been a great deal of confusion surrounding how to deal with the properties themselves, and we have not had sight of the Trust Deed and implementation documents themselves..."
"The initial advice on setting up the trust says that the family is excluded from benefit; the position now is that the family is being told that they are permitted to receive income distributions. The tax implications of this difference are exposure to section 86 TCGA which seeks to attribute gains of offshore trusts back to the UK settlor. This does not apply where the settlor and their family are excluded from benefit from the trust."
"Every year we check a number of returns to make sure that they are correct and that our customers are paying the right amount of tax. We would now like to check the company's return for the period ending31 July 2008 . This check will be made under paragraph 24(1), Schedule 18 of theFinance Act 1998 . I have written to your tax advisers, Mulligan Williams, to ask for the information I need. I enclose a copy of the letter I sent them."
"I refer to my letter dated25 May 2010 to which I have not received a reply. I have now issued a formal notice to your client as indicated in my last letter. A copy of the notice is attached for your file."
"An order or, alternatively, a declaration confirming that the trusts entered into by the Claimants be set aside on the ground that the trust [ sic ] was not fit for purpose and any and all assets be restored to the Claimants."
"(1) Subject to the following provisions of this clause, this Trust is established under the laws of Nevis pursuant to the Ordinance and shall be governed and construed and regulated by such."
“I confirm that we would prefer you had two employees of the UK company who are wholly unconnected with you or any family member please. Both these employees will have to be on the PAYE scheme that you administer”
“HMRC have asked for details of employees of Safe Investment Management UK Limited as at the date of establishment of RT in March 2007. My understanding, based on the list you provided to us in November last year is that Miss Taranjeet Bimbrah was the only employee at that time in addition to the directors, but we will be grateful if this could be confirmed. Confirmed. Could you also please let me know if Miss Bimbrah was related in any way to any of the shareholders in the company at the time of her employment, as HMRC have requested details of any “connected persons” who have been employed? Taranjeet Bimbrah is the wife of Mandeep Bhaur and this was made known to James and [Aston Court] prior to forming the trust. We discussed this with James in our meeting last year when the responses were sent to HMRC. If my understanding on the above matter is incorrect, would you please let me have details of any other employees of the company at the time that the RT was established and their relationship (if any) to the participators (shareholders) in the company please? As per our above response, all other employees were subcontractors. (No other PAYE employees.)”