A Trust is a Trust is a Trust…. even if not evidenced in writing… This was the finding of the First Tier Tax Tribunal in the case of Tang v HMRC, 2019 UKFTT 0081 TC
Lily Tang was a midwife who worked in the NHS.
In 2013 HMRC found out (having missed an information notice to the bank) that more than 90,000 US-Dollars were held in an account in Mrs Tang’s name with Standard Chartered in Singapore.
HMRC raised a discovery assessment against Mrs Tang and requested further information from her in relation to the account.
Mrs Tang advised HMRC that the money did not belong to her but belonged to her parents in law who were resident in Hong Kong. She further advised that she and her husband managed the monies in accordance with the instructions of her parents in law.
HMRC not being satisfied with these explanations went on to issue a Schedule 36 information notice to Mrs Tang.
She refused to provide bank statements because her parents-in-law who had no tax obligations to HMRC quite understandably did not want all their personal information to be provided to them.
Mrs Tang, to try and settle the matter with HMRC, did then offer to pay tax of £18,682 which she would have needed to pay by instalments.
This is the estimate of the tax which would have payable if the money in the account did belong to her. HMRC rejected this and raised a formal assessment for £318,155 in tax and penalties for deliberately failing to notify.
Later the assessment was reduced to £55,178 and penalties of £42,136.
Mrs Tang appealed the assessments on the grounds that she held the account on bare trust for her parents in law, and therefore it was not taxable in her hands. There was no trust deed or other documentation, the trust having been created orally.
HMRC countered with the argument that without a deed or other documentation no trust could exist. Mrs Tang obtained a sworn statement from her parents in law that unequivocally confirmed that the funds had always been held beneficially for them. This still did not satisfy HMRC.
Mrs Tang appealed to the FTT…
The FTT noted that
“it is well settled under English law that a trust deed does not need to be in writing and may be made orally”.
A bare trustee’s duty is to do as instructed by the beneficial owner. This was supported by the fact that in 2017, the funds had been returned to Mrs Tang’s parents in law.
The FTT were satisfied with the reasons provided by Mrs Tang as to why she did not comply with the Schedule 36 information notice, because the funds belonged to her parents in law and she was unable to provide bank statements for reasons of privacy and confidentiality.
Finally the FTT acknowledged the strength of the sworn statement of Mrs Tang’s parents in law which they considered to be a credible account of the nature of the fund and why it was held as it was.
The FTT allowed the appeal of Mrs Tang.