The Supreme Court decision in Standish on the use of inheritance tax planning in a divorce has implications for accountants as HMRC ramps up investigations

There has been a dramatic increase in the number of investigations into wealthy taxpayers. This trend is likely to continue, with HMRC having been provided with an additional £100m in funding, part of which it announced earlier this year would go towards its plans to employ 5,500 more compliance officers.

 

Recruitment for these positions is underway, and these new inspectors, and increased funding, will help HMRC to achieve its mandated goal of increasing its number of prosecutions by one fifth in the next five years.

 

When looking for wealthy individuals to investigate, one option for HMRC is to collect publicly available information generated by court proceedings unrelated to tax enforcement: a method where HMRC has a clear track record.

 

Relevant information on individuals’ tax and financial affairs can be gleaned from an array of litigation, from insolvency proceedings to contentious trust and probate disputes, and even divorce proceedings.

 

A curious case

 

On 2 July 2025, the Supreme Court issued its judgment on Standish v Standish, a family case that considered how the court should treat the ‘matrimonialisation’ of assets in a divorce.

 

The key issue between the parties in Standish related to the treatment of almost £80M transferred into the wife’s sole name in 2017, as part of a wider tax planning scheme to avoid inheritance tax (IHT).

 

The wife was non-domicile. Although the wider UK non-domicile and IHT tax rules continue to evolve, at that time, the husband’s legitimate and legal intention was for the wife to transfer these funds into an offshore trust, which she did not do; she kept the funds.

 

What followed is common to acrimonious divorces: the couples’ private financial arrangements were publicly considered and scrutinised by the courts. Standish may have been a high-profile case, but the level of scrutiny applied by the courts to their finances was not unusual.

 

Out in the open

 

In divorce proceedings, even those that are undisputed, both parties are legally required to provide full and frank disclosure of their financial circumstances.

 

If one party is not transparent in detailing their financial position, the other spouse is likely to raise this with the court and thereby ‘spill the beans’.

 

Unlike criminal proceedings, in civil proceedings defendants have a duty to disclose relevant documents to the other party, even if those documents may be adverse to their own case.

 

This duty is part of standard disclosure and requires defendants to conduct a reasonable search for documents in their control that are relevant to the issues in the case.

 

Consequently, individuals engaged in civil proceedings may be forced to provide material relevant to their tax position which may otherwise have remained private.

 

Leaving a trail

 

It is clear that contentious court proceedings are a potentially valuable source of intel for HMRC inspectors to identify wealthy individuals who may need to regularise their tax position.

 

HMRC will have to contend with certain restrictions on how material obtained through civil proceedings can be utilised, such as implied undertakings on its use elsewhere and adherence to data protection laws.

 

However, if a document has been referred to or read out in open court during a civil hearing, it may automatically become accessible to HMRC for use in criminal investigations, and as evidence in prosecutions.

 

Where documents have not been read out or referred to in open court, HMRC could still request permission from the civil court to use the documents in its criminal cases.

 

Too little too late

 

Even where the civil material cannot formally be used, it could still be used as intelligence and inform HMRC investigators’ criminal case theories.

 

HMRC can use relevant information to help identify where HMRC’s other powers may appropriately be used, such as production orders to obtain, for example, statements for relevant bank accounts. This may in turn uncover incriminating material.

 

Once HMRC becomes aware of tax irregularities, it may be too late for an individual to utilise the contractual disclosure facility (CDF), which offers individuals immunity from criminal prosecution for tax offences in return for a full disclosure of tax fraud.

 

Given the almost inevitable increase in prosecutions for tax offences, it is plainly important that individuals be aware of the consequences of their private financial affairs being made public as a result of non-tax related proceedings – be that divorce, child maintenance disputes, wills and probate challenges, or otherwise.

 

Individuals should ensure that their tax positions are regularised in advance of any disclosures of financial affairs in civil cases, as you can never be sure what might become relevant and disclosable in those proceedings, and therefore what HMRC’s newly expanded and prosecution-hungry team of investigators might get their hands on.

To find out more about how this will affect your company and employees please contact your KKVMS advisor.