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The first claimant’s husband was awarded damages in respect of injuries he suffered from a car accident. As receiver for her husband the first claimant put the money in a settlement.
After her husband’s unexpected death HMRC said that the form of the settlement meant that inheritance tax was due on the creation of the settlement on subsequent capital distributions after ten years and on the husband’s death.
The first claimant and her advisers had not considered the inheritance tax position when setting up the trust; had they done so and realised the impact the tax would have on the value of the damages they would have created a different kind of settlement to avoid the problem.
Therefore the first claimant asked to have the settlement unravelled invoking the Hastings-Bass principle (see Re Hastings-Bass deceased [1974] STC 211).
The judge...
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