Jersey Royal Court rescues US$15 million trust from significant UK tax liabilities after genuine estate-planning mistake

A wealthy couple who spent years carefully planning how to pass their fortune to future generations accidentally exposed a US$15 million family trust to a UK tax bill of more than half a million pounds after a seemingly routine “tidying-up” exercise. Jersey's Royal Court has now stepped in to undo the mistake.

In a reasoned judgment handed down on 17 June 2026 and made public this week, Deputy Bailiff Mark Temple (sitting with Jurats Dulake and Gardener) ruled that two 2018 donation agreements transferring shares into the Jersey trust should be treated as though they never happened.

Speed read

• Case: Representation of AB and Church Street Trustees Limited re E Trust [2026] JRC 171
• Trust assets: approximately US$15 million
• Potential UK tax exposure: immediate inheritance tax ≈ £350,000; ten-year anniversary charge ≈ £144,000; plus annual income tax and CGT estimated in the tens of thousands per year – total well in excess of £500,000
• Outcome: Donation Agreements declared voidable and of no legal effect under Article 47E of the Trusts (Jersey) Law 1984
• Key finding: Genuine mistake as to UK tax consequences; the couple would not have proceeded “but for” the mistake; the mistake was serious enough to make it just to grant relief

Background

• The E Trust was established by a declaration of trust dated 19 May 2003 by Church Street Trustees Limited (a Jersey resident and regulated trust company). Its purpose was multi-generational estate planning, asset protection and cost/tax efficiency.
• The couple (anonymised as AB and BB) were South African by birth but long-term UK residents. Following changes in UK tax legislation, they became deemed domiciled in the UK for tax purposes from 6 April 2017. Most of their non-UK assets had already been transferred into the Jersey trust before that date.
• One asset had been overlooked: Class B shares in a BVI company (SG Limited). These were described as “static” assets that did not require constant monitoring. During an annual financial review in 2018, South African advisers suggested transferring approximately 70% of those shares into the E Trust as a “tidying-up” exercise.
• No specific UK tax advice was obtained for the 2018 transfers. The advisers focused on the South African tax position. The couple, then in their mid-seventies and reliant on their professional advisers, proceeded.

The mistake and its discovery

• In February 2022, when the family sought to transfer the remaining shares, the Jersey trustee reviewed the proposal and realised that the 2018 transfers had inadvertently triggered substantial UK tax liabilities.
• Expert tax advice later placed before the Court (from Blick Rothenberg) quantified the exposure as:

• Immediate UK inheritance tax on the transfer ≈ £350,000
• Additional UK inheritance tax ten-year anniversary charge ≈ £144,000 (due later in 2026)
• Annual UK income tax estimated at around £20,000 per relevant year
• Capital gains tax estimated at around £13,000 per year

• In total, the adverse UK tax consequences were well in excess of £500,000 against a trust with assets of around US$15 million.

The settlor’s position

• AB told the Court in an affidavit:

• “I would never have proceeded with the transfer of the [shares in SG Limited] in 2018 had I been aware of all the material issues, which have exposed the assets of the Trust to very significant, but entirely (and permissibly) avoidable, UK tax liabilities.
• The whole purpose of the [E Trust], and the otherwise very careful thought and planning that went into its creation and the steps that were taken pre-6 April 2017, will be entirely undermined if the [mistake] is allowed to stand…”

• All adult beneficiaries supported the application.

The Court’s decision

• The Representors applied under Articles 47E, 51 and 53 of the Trusts (Jersey) Law 1984 for a declaration that the two Donation Agreements (dated 30 April 2018 for BB and 1 May 2018 for AB) were voidable and of no effect.
• The Court applied the three-question test set out in In the Matter of the G Trust [2019] (1) JLR 175:

• Was there a mistake? Yes – a genuine mistake as to the UK tax consequences of the transfers. The Court found no grounds to infer that the couple had deliberately run the risk.
• Would they not have transferred but for the mistake? Yes – satisfied on the affidavit evidence.
• Was the mistake of so serious a character as to render it just to grant relief? Yes. The tax exposure was serious relative to the size of the trust. Granting relief would not deprive HMRC of tax it would otherwise have received; refusing it would give HMRC a windfall arising solely from the mistake. The transfers were legitimate estate planning, not aggressive tax avoidance.

• The Court expressly noted that the Donation Agreements “were not in any sense an aggressive tax mitigation strategy, or a complex or artificial exercise in tax avoidance”.
• The two Donation Agreements were declared voidable and of no legal effect. The Court also authorised disclosure of the judgment and supporting evidence to HMRC if required.

Practical takeaways for Jersey trustees, settlors and advisers

• Specific advice matters. General prior advice on deemed domicile was not enough. The absence of targeted UK tax advice on the 2018 “tidying-up” transfer proved decisive.
• Jersey’s mistake jurisdiction remains robust. Article 47E continues to provide a practical route to unwind transfers where there is a genuine, serious mistake as to tax consequences. Jersey law does not follow the English distinction in Pitt v Holt between different types of mistake.
• Trustee vigilance is critical. It was the Jersey trustee’s review in 2022 that identified the problem. Trustees who accept assets without interrogating the tax position of the transfer risk inheriting avoidable liabilities for the trust.
• HMRC windfall arguments carry weight. The Court was clear that granting relief did not deprive the UK of tax that would otherwise have been due; it simply prevented a windfall created by mistake.
• Delay can be excused. Discovery in 2022, proceedings issued in 2024, and final hearing in 2026 (complicated by the death of one settlor and the need for BVI letters of administration) did not bar relief.

Sources

• Bailiwick Express news report (5 August 2026):
• https://www.bailiwickexpress.com/news/jersey-court-rescues-15m-trust-from-inheritance-bill-after-tax-planning-mistake/
• Royal Court judgment – Representation of AB and Church Street Trustees Limited re E Trust [2026] JRC 171 (17 June 2026):
• https://www.jerseylaw.je/judgments/unreported/Pages/[2026]JRC171.aspx