Sham Trusts: how does the recent statement in the High Court that Sham Trusts do not really exist correlate to the OECD CRS Guidelines
November 7th 2017
The recent case of JSC Mezhdunarodniy Promyshlenniy Bank v
Pugachev  EWHC 2426 (Ch) or "Putin's banker" contains a
welcome analysis of what, if anything, a sham trust signifies
The phrase is frequently used as a threat by tax adminstrations
to beseige offshore trustees, and it is therefore of interest to
those involved in the Common Reporting Standard and its reporting
It is apposite, as the term trust in itself does not describe a
legal entity, as there is no legal entity or legal person created
by a "trust". It is therefore impossible to create a "sham"
trust. It is, as the judgment points out an issue as to the
nature of the documentation as between the trustees and the
Settlor. The trust itself is in fact a concept independent of
the trust instrument or deed, which does no more than evidence the
existence of the property arrangement that the trust is and the
manner in which the persons named in the trust may operate in
relation to each other and the property held in trust.
As the term "sham" is also bandied about gleefully by NGOs and
others with gay abandon, the statement by Birss J that
"Despite the frequent references to a
"sham trust", there is not really any such
might rock a few Saint Catherine's punts on the Isis to the point
of overturning. Those gliding peacefully on the Cam may suffer less
as ideas are more scientifically orientated in the Fens, at least
on the western side of Parsons Green.
Peter has written a short summary of the impact that
the judgment might have on such issues as the Common Reporting
Standard and international tax verifications generally and is
available for advice on how to use the legal confirmation of the
limited value that the term bears.
Please see the Resources page