Analysis
This appeal concerned the estate of Lady Edwards-Moss (the deceased) who died on 8 February 2007. The executors of her estate appealed against a determination under s221 IHTA 1984. HMRC argued that the liability arose on two alternative bases. First, the transfer of a freehold farm in return for an annuity on 23 January 2007 (very shortly before her death) was ineffective (either on the basis that it was legally ineffective or under the reservation of benefit rules). Alternatively, this was a transfer at an undervalue, and therefore a transfer of value on which an IHT liability arose on the basis of a failed potentially exempt transfer.
Against this background, HMRC applied for disclosure of ‘all medical records’ for the period 8 February 2002 to 8 February 2007 in relation to her chronic obstructive pulmonary disorder (COPD) and ‘cor pulmunale’. These two conditions were used on the deceased’s death certificate as the primary and secondary cause of death respectively.
The appellant opposed this application on the grounds the records sought were not relevant to the issues in the proceedings, or alternatively that they were inconsistent with the deceased’s right to privacy. It was agreed between the parties that the medical records were relevant but only to the alternative ‘transfer at an undervalue’ issue, as the deceased’s state of health was relevant to the value of the annuity she had received. Therefore the ‘relevance’ issue was solely concerned with whether the ‘transfer at an undervalue’ issue was properly an issue in the proceedings. This involved considering whether the notice of determination which HMRC issued included the ‘transfer at an undervalue’ issue. The language of the determination upon which HMRC relied was:
the full unencumbered open market value of [the farm], in accordance with s160 IHTA, is to be taken into account in ascertain the value of the deceased’s estate for the purpose of inheritance tax having regard to s4(1) and 5(1) of IHTA.
The parties were agreed that a dead person has a right to privacy, and that individuals have the right to expect their medical records will remain confidential even after their death.
Held:
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- 1) The tribunal only has power to give directions in relation to the conduct or disposal of proceedings, so unless disclosure relates to an issue in proceedings, the tribunal does not have the power to order it.
- 2) On a literal reading of the determination, the language did not cover the ‘transfer at an undervalue’ issue. This would have made the executors liable under s2 and s3 IHTA, whereas the determination referred to s4 and s5.
- 3) Although s221 IHTA was distinct from s28B TMA (as there was no formal enquiry process) both sections concerned a determination of an officer. Accordingly the guidance of the Supreme Court in Tower MCashback about interpretation of a closure notice was relevant to the interpretation of a notice of determination.
- 4) In MCashback the Supreme Court considered that HMRC can rely on alternative reasoning to support a conclusion that the taxpayer was liable. The tribunal had to fairly balance the competing interests of the taxpayer and the general public in deciding what was in dispute, and this involved looking at the context of the notice of determination, including the preceding and accompanying letters. In this case the correspondence made clear that HMRC were considering the ‘transfer at an undervalue’ issue. Accordingly, the determination must be interpreted as a determination that the executors were liable to pay IHT on the value of the farm, and HMRC were entitled to rely on the alternative ‘transfer of value’ reasoning. Accordingly the medical records were relevant.
- 5) While a tribunal cannot act in breach of a person’s rights, the right to privacy is caveated and balanced against other public interests. The public interest in the collection of the right amount of tax must be balanced against any right to privacy. The medical records were central to a live issue in the proceedings. Here there was a clear public interest that the medical records so far as relevant be made available and this outweighed the right to keep such records confidential. HMRC had limited their requests to recent and relevant illnesses. It would be open to the appellants to seek an order that the medical evidence is heard in private or that they be redacted in the written decision. The appellants had led evidence on the state of their mother’s health and it would be contrary to justice to deny HMRC the opportunity to verify these statements.
6) A two year period of disclosure (rather than the five year period sought by HMRC) was appropriate in the circumstances of the case. The evidence suggested that the deceased either took some steps towards a planning scheme, or at least advice in respect of it, in 2005, so a period from 2005 to 2007 was appropriate.
MOSEDALE J [1] Lady Edwards-Moss (the deceased) died on 8 February 2007. On 10 April 2014 HMRC issued a notice of determination on her executors (two of her sons) under s221 Inheritance Act 1984 (IHTA). The executors appealed this on 19 May 2014. HMRC offered a review which was duly carried out and the conclusion …Continue reading "Edwards-Moss & anr v HMRC [2016] UKFTT 147 (TC)"