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HMRC internal manual

Trusts, Settlements and Estates Manual

Introduction to trusts: claims about error relating to trust: error made by trustees (the ‘rule in Hastings-Bass’)

Where trustees act in error, with the result that they incur tax they had not anticipated, the parties involved may then seek to overturn their actions through the High Court by invoking ‘Hastings-Bass’. The parties may ask whether HM Revenue & Customs wants to be joined in the proceedings.

In some cases the parties may approach us seeking our agreement to ignore the error for tax purposes without going to Court.  In the absence of a court order we would normally adhere to the tax consequences that flow from the trustees’ actions.

The Supreme Court decision in the appeals of Futter and another v HMRC and Pitt and another v HMRC [2013] UKSC26 __removed the possibility of trustees invoking ‘Hastings-Bass’ merely to get round an error based on incorrect tax advice. If the trustees have taken advice and it turns out to be wrong, that is not enough for the Court to make their action void. It is only if the trustees have acted in breach of fiduciary duty that the Court may consider whether to declare the action void.

Refer any cases involving ‘Hastings-Bass’ to Trusts Technical Bootle for advice.