Magma’s expert Private Client Tax team have recently helped a client earn victory over HMRC in the Court of Appeal, following a drawn-out debate over the taxation of trust income and its follow-on treatment when distributed to beneficiaries.

Back in 2018, our knowledge and efforts sought to challenge the views of a former adviser that the specifics of a trusts tax situation led to an unavoidable double layer of higher rate UK taxation. A claim for tax credit was made to HMRC under one of their own Extra Statutory Concessions (ESC B18).  The claim was partly successful, but its success restricted due to HMRC imposing a 6-year time limitation, based on their interpretation of the wording of the concession.

Judicial Review was sought and in 2021 the High Court initially rejected the claim, supporting HMRC’s interpretation of their own concession.  Not to be deterred, the case ended up at the Court of Appeal in April 2023, where the High Court verdict overturned. The Court of Appeal judges accepted the arguments that the wording and construction of the concession did not impose a 6-year time limitation on claims for tax credit.  

The judgment was unequivocally prescribed with “no ambiguity”… and is very welcome 4 years on from the tax credit claims first being submitted to HMRC.

The judgment will be of wider interest to UK beneficiaries in receipt of income from non-UK resident trusts, and more generally to any taxpayer seeking to interpret or rely on the wording of any HMRC concession or other published document such as HMRC manuals or guidance.

The case emphasises that the proper interpretation of any published HMRC document is based on what the “ordinarily sophisticated taxpayer” would understand the document to mean.

A combination of expert tax knowledge, client focus and tenacity saw this through. If you have a complex Private Client or trust tax issue, whether or not it is something that HMRC dispute, we would be pleased to hear about it. 

The Team

Our experienced and approachable team are on-hand to assist you, please get in touch below: