We have taken over a trust client where for income tax purposes the trust has reported income of £x over the past 10 years as an IIP.
On reading of the trust deed and after consulting counsel it is clear that the trust is discretionary and income should have been reported as such.
The trustees now have a liability to consider of say £200,000, plus interest.
On the other side, the beneficary would be entitled to a repayment of £150,000 during the same period.
Q, if we admit the error on the trust side will HMRC automatically allow an overpayment to the beneficiary on the basis that we are comparing like with like with one error. Or will the strict overpayment relief of 4 years be adhered to ?