Analysis
The late Mrs Matthews (D) invested approximately £95,000 in a Building Society account with her son, the claimant, John Matthews (M) in 1999. The words ‘either signature’ were included in the special instructions for operation of the account. Between 1999 and 19 January 2007 when D died there were no withdrawals from the account and both D and M included half the interest on their tax returns. M claimed that D intended to make an immediate gift of the moneys in the account to him on the date it was opened and that he could have used that money for what ever purpose he wished, but there was no evidence to support this claim. On 24 September 2008 HMRC issued a notice of determination to inheritance tax stating that the whole of the moneys in the account in the joint names of M and D were liable to inheritance tax either under s5(2) Inheritance Tax Act 1984, which provides:
‘A person who has a general power which enables him, or would if he were sui juris enable him, to dispose of any property other than settled property, or to charge money on any property other than settled properly, shall be treated as beneficially entitled to the property or money and for this purpose “general power” means a power or authority enabling the person by whom it is exercisable to appoint or dispose of property as he thinks fit’,
or as a gift with reservation. D appealed claiming that there was a tenancy in common and D had made an absolute gift of half the amount in the account on the date it was opened.
Held
Appeal dismissed. Determination upheld [23]. The whole of the amount was taxable.
The account was a joint account and there was no tenancy in common. Either M or D could withdraw funds up to the total amount deposited for his or her own benefit. While D’s power over the account was not a general power in the ordinary sense, it fitted the definition. D was able to dispose of the balance as she thought fit. The joint account was plainly not settled property. It was unlikely that if D had needed more than one half of the initial balance the excess would have been a gift by M. It was much more realistic to regard D as having power to deal with the account as she thought fit. Whether or not s5(2) could produce cases of double taxation [13] did not arise in this appeal and on the facts found this was not a case where double taxation could arise [21]. On the other hand, it was unlikely that M had any such general power. The account was held beneficially as joint tenants. The gift was of a chose in action consisting of the whole account, not one half of the initial balance. It followed that possession and enjoyment of the account had not been assumed by M because D was still entitled to a share; and nor had it been enjoyed to the exclusion of D and of any benefit to her as all benefits from the account were enjoyed by D [23].
JUDGMENT Decision [1] This is an appeal by Mr John Matthews (Mr Matthews), as executor and trustee of the will of his late mother, Mrs Mary Jean Matthews (the deceased) against a notice of determination to inheritance tax of 24 September 2008 that the whole of the moneys in Abbey investment account no K6345918MAT in …Continue reading "Matthews v HMRCC"