Bhaur: Setting aside a transaction on the grounds of mistake

The recent decision of the Court of Appeal in Bhaur and others v Equity First Trustees (Nevis) Ltd and others [2023] EWCA Civ 53 (Bhaur) provides helpful guidance on when a court will set aside a transaction (and thereby unwind adverse tax consequences) on the grounds of mistake.

The case concerned a tax avoidance scheme involving the establishment of an employee benefit trust and the court refused relief on the basis that this was artificial tax avoidance where the taxpayer had deliberately run the risk of the scheme failing.

While the decision is not surprising on the facts of the case a key takeaway is that the English courts remain receptive to claims to set aside voluntary transactions on grounds of mistake in the right circumstances – such a claim is always worth considering where a taxpayer is faced with unexpected tax consequences.

Background...