A specific clause within trust deeds drafted by Cotswold Barristers, known as clause 2.4, has become the subject of growing criticism from various professional advisers. These advisers are reportedly presenting clients with potentially damaging interpretations of the clause, often leading to recommendations to either unwind existing arrangements or settle with HMRC.
The criticism frequently isolates clause 2.4 from the broader contractual framework, focusing on an interpretation that suggests individual trustees could terminate the trust and reclaim beneficial ownership of properties without payment. This interpretation has been linked to predictions of serious tax consequences.
Mark Smith of Cotswold Barristers, who drafted the clause, does not accept these interpretations or the assertion that alleged tax consequences automatically follow. He maintains his advice and the clients' positions, stating that clients intended to incorporate their businesses and did not believe they were making a temporary, reversible transfer.
The argument surrounding clause 2.4 gained public attention following a Tax Policy Associates article published in November 2023 by Dan Neidle. This article presented a professional opinion, not a court judgment, on the clause's potential implications.