Analysis
By his will dated 12 May 1997, Martin Moses Menachem Lerner (deceased) divided his net residuary estate into ten equal shares between the appellant as to nine shares and the Chay Charitable Trust (CCT) as to one share. Subsequently, the deceased gifted £60,000 cash to the appellant and transferred in excess of £400,000 worth of quoted shares to the CCT. Following the deceased’s death on 21 October 1999, a disappointed beneficiary under a former will disputed the validity of the last will on the grounds of testamentary incapacity, but this was settled on 22 October 2001 on terms that required the appellant and the CCT to pay a lump sum of £400,000. The appellant obtained a grant of letters of administration with the last will annexed on 7 November 2002. The Inland Revenue account included as an asset of the estate the sum of £107,210 due from Towvale Limited (company), the entire issued share capital of which was held by the deceased. By notice of determination dated 20 October 2008, the respondent determined that the chargeable amount of the value transferred on the deceased’s death was £716,016 (including the sum of £107,210 due from the company). Of the total inheritance tax due, the appellant was liable for a total of just under £88,500 representing unpaid tax and interest. The appellant appealed.
Held (dismissing the appeal)
Fox Associates, chartered accountants, contended on behalf of the appellant that:
- (1) the sum of £107,210 due from the company ought not to be included in the calculation because it was a gift, not a loan, by the deceased;
- (2) the payment of £400,000 made to settle the litigation was deductible in calculating the total chargeable transfer on the basis that it was a liability of the deceased’s estate; and
- (3) further payments made by the appellant to the CCT over and above its one-tenth share of residue should qualify for exemption as gifts to charity by the deceased.
HMRC submitted, and it was accepted, that none of these contentions were justified by the evidence. In particular, there was no evidence to suggest that the sum of £107,210 was a gift, rather than a loan, to the company (confirmed by a post-death balance sheet that showed a total of £108,974 owing to creditors by the company) and, even if it were a gift, instead of a loan, this would have no effect on the amount of the chargeable transfer on the deceased’s death as none of the shares in the company attracted business property relief. As for the payment of £400,000 to settle the litigation with the disappointed beneficiary, there was no liability on the deceased to make any such payment immediately before his death. Instead, it was a payment made by the appellant and the CCT in order to settle the litigation brought after the deceased’s death and had no effect for inheritance tax purposes. As for the further charitable payments allegedly made by the appellant, there was simply no evidence that any such were made within two years of the deceased’s death.
JUDGMENT JUDGE JOHN WALTERS QC: [1] The appellant, Ginette Silber (Mrs Silber) appealed on 27 October 2008 against a notice of determination (the notice) dated 20 October 2008 made by the respondents (HMRC) in relation to the deemed transfer of value on the death on 21 October 1999 of Martin Moses Menachem Lerner (the deceased). …Continue reading "Silber v HMRC [2012] UKFTT 700 (TC)"