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The claimants who were both trustees of a settlement advanced the entire trust fund to the first claimant and his children unaware of the capital gains tax consequences.
They had anticipated that any gains could be offset against personal losses under TCGA 1992 s 89.
However this was not the case and the beneficiaries became liable to substantial capital gains tax.
The trustees applied to have the advancements declared void under the Hastings-Bass principle i.e. that they had not exercised their power properly (see Re Hastings-Bass deceased [1974] STC 211).
HMRC opposed the application.
In the High Court Mr Justice Norris said the Hastings-Bass principle existed not to exonerate advisers from poor decisions but to ensure that beneficiaries did not suffer by an invalid exercise of power by trustees.
The trustees...
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