All is lost! Mistake cannot unwind artificial tax avoidance scheme (Bhaur v Equity First Trustees (Nevis) Ltd)

Article summary

Private Client analysis: This case provides a salutary lesson to those considering entering into artificial tax avoidance schemes and professionals advising those who have already participated in such schemes. The court held that the transfer of the taxpayers’ substantial property portfolio into a trust, as part of a tax avoidance scheme, could not be set aside due to mistake. In reaching this conclusion, the court considered such schemes a social evil, and if entered into deliberately with knowledge of the risks being run, the taxpayer could not look to the courts to set aside the transactions, no matter how financially devastating the scheme failure. Further, the dishonesty of those advising on the tax avoidance scheme was not relevant to the issue of mistake. Those entering into such schemes must therefore necessarily consider how they can extricate themselves should the scheme go wrong, in the knowledge that the courts are unlikely to step in and...