Fair discovery

Availability of information on a trust return

In 2006-07 the taxpayer established a trust of which he was the life tenant. The trustee was based in Guernsey. In November 2006 the taxpayer submitted form 41G (trust) notifying HMRC of the existence of the settlement. The trustee entered into a Guernsey limited partnership that traded in property in the UK. The taxpayer as life tenant received the trust’s share of the profit. In his tax return for 2006-07 he declared the income on the foreign additional pages as ‘income received by an overseas trust company and other entity…’ claiming it was exempt under Art 3 of the UK/Guernsey double tax treaty.

The trustee completed a trust return disclosing the information.

HMRC raised a discovery assessment to collect tax on the payment on the ground that the exemption did not apply. The taxpayer accepted the...