On 9 June 2023, the Full Federal Court of Australia ruled that the s.100A anti‑avoidance legislation applies to deny a trustee’s claim for tax relief in a share buy‑back arrangement. The decision in B&F Investments Pty Ltd, as trustee for the Illuka Park Trust v Commissioner of Taxation,[1] widely known as BBlood, carries significant implications. The court’s conclusion was largely based on its observation that the trust’s advisors had initiated the reimbursement agreement with an intention to get a favourable tax outcome and deemed the accountancy firm to be a party to that arrangement. Stayed proceedings against five of the firm’s other clients can now proceed.
Brazil
Brazil’s congress has approved Provisional Measure No 1,172 of 2023, setting out changes to the taxation rules for Brazilian individuals with income in investments, controlled entities and trusts located abroad.
Canada
The Superior Court of Justice of Ontario (the SCJO), in Henderson v Sands,[2]rejected an application for the removal of an executor, emphasising ‘the high threshold for removal’. The court cited previous case law, noting that ‘the passing over of an estate trustee is an unusual and extreme course’ and one that should be undertaken with clear evidence and as a ‘last resort’. In the case at hand, the court found that the executor had not been perfect in her administration of the estate, having been slow to pay various bills and to provide the beneficiaries with a copy of the will. However, it also found that the applicants did not meet the ‘heavy burden to show that this case is one of clear necessity, where there is no other course to follow, but to remove [the respondent] as Estate Trustee’. It therefore rejected the application, but put in place some agreed measures to expedite the administration of the estate.
In Hutchinson v Woodhouse,[3]the SCJO ruled that two siblings who disagreed over the distribution of their mother’s assets should both be replaced as cotrustees of the estate. The applicant, a third sibling who was not a trustee, brought the case seeking to replace them with herself. One of the two respondents, Marie Woodhouse, sought to dismiss this and bring an application about the other respondent regarding the alleged misappropriation of estate funds. The SCJO found that Woodhouse was ‘improperly holding estate funds’ as security for this claim of misappropriation. It therefore agreed that the cotrustees should be removed; however, instead of appointing the third sibling, it ruled that ‘a neutral, independent, professional, estate trustee be appointed in substitution on behalf of the estate’.
Guernsey
The Guernsey Financial Services Commission issued a consultation paper on proposed additional rules and guidance for virtual asset service providers and related businesses on meeting the requirements of Schedule 3 to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 and the antimoney laundering (AML) handbook. It also sought comments on proposed additional rules and guidance for licensed trustees and licensed partners of partnerships and limited partnerships without legal personality. These rules deal with holding information on the identity of other regulated agents and service providers to a trust or partnership and disclosing their status as trustee or partner. The consultation closed on 3 July 2023.
Jersey
The deadline for Jerseybased directors and family offices to register as a Schedule 2 business under the AML regime has again been extended. The deadline has been moved from 31 August to 30 September 2023. The extension applies to family offices that do not use a private trust corporation administered by a person registered in Jersey to carry out Jersey trust company business. It also applies to trustees in respect of any trusts that undertake lending activities. The extension is to ensure these newly inscope sectors, predominantly individuals, are aware of their registration requirements.
Jersey’s government has made an order further amending its proceeds of crime legislation as it applies to private trust companies (PTCs). The order clarifies that all PTCs and other corporate bodies acting as trustees of an express trust are subject to mandatory registration under Jersey’s AML regime from 30 September 2023.
Malta
The Malta Financial Services Authority (MFSA) has published proposed amendments to the rules for trustees of family trusts. The changes will clarify the MFSA’s criteria for deciding whether an applicant has a sufficient family connection to be registered as a trustee under art.43B of the Trusts and Trustees Act. Applicants will also have to explain why they chose Malta as the trustee jurisdiction and the fit‑and‑proper assessment will be broadened to cover parties other than directors.
Spain
Regulations for the creation and operation of Spain’s central public registry of ultimate beneficial ownership have been gazetted, implementing Royal Decree 609/2023 of 11 July with effect for all Spanish legal entities and other entities or structures without legal personality.
UK
The UK’s Office of Financial Sanctions Implementation (OFSI) has clarified the trust services sanctions that came into effect on 16 December 2022 against persons connected with Russia. It notes the prohibition on providing new trust services would not normally apply to individuals who only occasionally travel to Russia while normally being resident or located in the UK nor to Russian nationals who are not ordinarily resident or located in Russia. Over 1,820 persons have been designated for the purposes of trust services sanctions since March 2023 (as of June 2023).
His Majesty’s Revenue and Customs (HMRC) has published its handbook for staff involved in supervising compliance with the economic crime regulations. The handbook covers sanctions, relevant criminal and civil powers to monitor businesses and referral of cases for criminal investigation and prosecution. It notes that an HMRC official can impose sanctions on an individual beneficial owner, officer or manager, if that individual was knowingly concerned in a contravention. In the case of a trust or company service provider, this could include a decision that the business is not fit and proper and should have its registration cancelled.
HMRC has published proposals to prevent the use of employee ownership trusts and employee benefit trusts being used to avoid inheritance tax. The consultation closes on 25 September 2023.
The Charity Commission for England and Wales (the Charity Commission) has updated its CC14 guidance on charity trustees’ investment duties to take account of the England and Wales High Court’s (the EWHC’s) judgment in the case of Butler‑Sloss v Charity Commission.[4]The ‘refreshed’ CC14 makes it clearer that trustees have discretion to choose what is best in their circumstances and have a range of investment options open to them, provided they ultimately further the charity’s purposes. Terminology regarded as unhelpful, such as ‘ethical investment’, ‘mixed motive investment’ and ‘programme related investment’, has been dropped.
In Wilkinson v Hicken,[5]a will made by retired businessman Norman Gill six weeks before his death, leaving most of his GBP5.3 million estate to a charitable trust to benefit the people of Leicester, has survived a challenge in the EWHC on grounds of lack of capacity and lack of knowledge or approval of its contents. His daughter, Jessica, argued that the will was not rational by significantly excluding his estranged children and grandchildren, and that her father had suffered a personality disorder that poisoned his attitude to them. But His Honour Judge Williams decided that disinheriting the children and grandchildren might be unfair but was not irrational, given that he had concluded that his children were not willing to reconcile with him.
The Office of the Public Guardian in England and Wales (the OPG) has issued an information pack or ‘toolkit’ to help parents and carers make financial decisions for young people. The toolkit is part of the OPG’s commitment to increase public awareness of the Mental Capacity Act 2005 in the context of the transition from childhood to adulthood. Topics covered include the relevant route for a parent or carer to make financial decisions on behalf of a young person, including how to access a child trust fund and how to prepare to make financial decisions when a young person reaches adulthood.
In Vneshprombank v Bedzhamov,[6]the EWHC has agreed to relax a worldwide freezing order against Russian bankruptee Georgy Ivanovich Bedzhamov so that he could sell his London properties and pay his outstanding legal expenses, amounting to GBP5 million, and some future fees. Bedzhamov’s trustee in bankruptcy, Lyubov Kireeva, opposed the property sale until her appeal to the UK Supreme Court for appointment of a courtappointed receiver is heard in November 2023. However, the EWHC ruled that the matter had to be resolved now, to avoid the risk that the sale might fall through or realise less money than Bedzhamov needs.
The EWHC has granted the beneficiaries of three Jersey discretionary trusts an order for restoration of GBP410 million of assets in Adams v FS Capital.[7]The assets had been sold by the corporate trustee to a special purpose vehicle (SPV) for an ‘improper purpose’ at a huge undervalue. The nowinsolvent trusts had formed part of employerfinanced retirement benefit schemes that were subsequently impacted by the disguised remuneration loan charge. The SPV recipient was ruled not to be a bona fide purchaser for value and was both liable to restore the assets to the trusts and personally liable as a knowing recipient.
The UK government has published a new howto guide to help families access the trust funds of disabled young adults by obtaining a lasting power of attorney or applying for a court order under the Mental Capacity Act 2005. The guidance is part of the government’s response to a campaign to help parents whose disabled children have child trust funds opened in their infancy, but who still do not have capacity to access their funds after reaching majority. A small payments scheme consultation, published in February 2023, concluded that a scheme to allow parents easier access to small sums could open the finances of vulnerable people to fraud. Instead, the government is trying to speed up the application process.
A son has won his proprietary estoppel claim over his father’s farmland on the latter’s death in the case of Spencer v Estate of John Spencer.[8]The claim was made on the basis of assurance made during the father’s lifetime, which the father failed to honour in his will. The EWHC decided in the son’s favour, awarding him all the disputed farmland except for the non agricultural value of certain land that has since been split off for quarrying. That land will now pass to a discretionary family trust according to the deceased’s testamentary wishes.
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