The Executors of Keith Denis Lewis Beresford (Deceased) v The Commissioners for HMRC
[2024] UKFTT 952 (TC)
David Marks (Executor of Hilda Marks) v The Commissioners for HMRC
23 July 2024
[2024] UKFTT 706 (TC)
First-tier Tribunal
A family fought the taxman over inheritance tax. They argued a lower rate should apply due to a large charitable gift and that their holiday rental qualified for a tax break. The judge decided against them, saying the charity gift wasn't as big as they claimed and that the rental business was essentially just an investment property.
Key Facts
- •Appeal against 10 Notices of Determination under s.221 of the Inheritance Tax Act 1984 (IHTA) relating to the estate of Hilda Marks.
- •Two main issues: (1) Whether the charitable giving condition in Schedule 1A, IHTA reduces IHT from 40% to 36%; (2) Whether a property qualifies for business property relief (BPR) under s.104 IHTA.
- •Significant amount of information provided, with much of it being unsupported assertions.
- •Witness evidence heard from several individuals, including family members and a former minister.
- •The estate comprised a 'free estate' and a Will Trust, with the latter containing a charitable provision.
- •Disputes centered around the interpretation of the Samuel Marks' Will and four Deeds of Appointment regarding the distribution of assets.
- •HMRC's initial approach and the executor's revised approach to IHT calculation differed significantly.
- •The property in question (2 Dorchester Mansions) was used as a holiday let, primarily to Orthodox Jewish guests.
Legal Principles
Interpretation of wills: Courts avoid capricious or harsh results; ambiguity allows for consideration of extrinsic evidence (including testator's intention).
Williams on Wills, AJA 1982 s.21
Inheritance tax: Lower rate applies if charitable donations meet defined conditions; election allows for merging estate components.
IHTA s.4, s.5, s.23, Schedule 1A
Business Property Relief: Property is not relevant business property if the business consists wholly or mainly of making or holding investments; consideration of the business 'in the round'.
IHTA s.104, s.105, s.103(3), s.106; George v IRC [2003] EWCA Civ 1763; McCall v HMRC [2009] NICA 12; Pawson [2013] UKUT 50; Brander v HMRC [2010] UKUT 300 (TCC); HMRC v Vigne [2018] UKUT 357 (TCC)
Outcomes
Appeal dismissed regarding the lower IHT rate.
The Will's charitable provision was interpreted as applying to the residue after lifetime distributions, not the initial estate value. The Deeds of Appointment were considered absolute transfers, depleting the residue.
Appeal dismissed regarding BPR.
The holiday let business was deemed to consist mainly of holding investments despite the executor's arguments regarding personal involvement and the Kosher nature of the business. Insufficient evidence supported a different conclusion.