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Bhaur: mistake cannot unwind artificial avoidance scheme

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The Court of Appeal judgment in Bhaur v Equity First Trustees (Nevis) Ltd provides a salutary lesson to those entering into artificial tax avoidance schemes. The court held that the transfer of the taxpayers’ substantial property portfolio into a trust as part of a tax avoidance scheme could not be set aside due to mistake. In reaching this conclusion the court considered such schemes a social evil and if entered into deliberately with knowledge of the risks being run the taxpayer could not look to the courts to set aside the transactions no matter how financially devastating the scheme failure. Further the dishonesty of those advising on the avoidance scheme was not relevant to the issue of mistake. Those entering into such schemes should therefore consider how they can extricate themselves should the scheme go wrong in the knowledge that the courts...

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