Van de Merwe v Goldman & Another [2016] EWHC 790(Ch) – a case setting aside transactions on a mistake as to the tax consequences.

Van de Merwe is an interesting case applying the rules restated in Pitt v Holt [2013] 2 AC 108 to a series of transactions where the tax consequences were unappreciated by the parties.

In essence, the parties believed that by transferring a property into an interest in possession settlement, the trustees of the settlement would be able to borrow monies against the property and invest the same outside of he UK to take advantage of the Settlor’s non-domicile status which would be deemed to be UK with effect from 6th April 2006 (s267 Inheritance Tax Act 1984 as it then stood).

The settlement was duly created but in ignorance of the budget announcement on 22nd March 2006 to the effect that such a settlement would thereafter be treated as a chargeable transfer for value for IHT purposes.

Applying the criteria in Pitt, the Court (Morgan J) concluded that there was a mistake sufficiently serious as to render it unjust not to rescind the transaction, the Settlor did not run the risk of a scheme failing, and was not mere ignorance because it lead to a false belief or assumption as to the tax consequences.

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