HMRC loses landmark inheritance tax appeal
27th August 2010 by: David Maxwell
The taxman has lost a court battle to withhold inheritance tax relief which applies to certain categories of business assets on the multi-million pound estate of the late Lord Balfour, descendant of the First World War Prime Minister.
When Lord Balfour died on 27th June 2003, the estate included farms under the control of his family, farms which had been let out since the 1950s, woodlands and sporting rights, twenty six let houses and cottages and two sets of business premises.
Under Section 105 (3) of the Inheritance Tax Act, a business or interest in a business does not qualify for the relief if the business consists wholly or mainly of operations which deal in securities, stocks or shares, land or buildings or making or holding investments.
In 2009, the First Tier Tax Tribunal allowed an appeal by Lord Balfour’s executors against a determination by HMRC denying business property tax relief in respect of land, houses, and cottages which were let to third parties.
HMRC then appealed to the Upper Tier tax tribunal to reverse the decision, however, the upper court concluded that they were "satisfied that on the evidence before him, Judge Reid was entitled to conclude that section 105(3) did not apply because Lord Balfour's business at Whittingehame Estate did not consist mainly of holding investments”, and that "having decided the questions raised by HMRC against them, we therefore refuse the appeal."
David Maxwell of Seddons' Private Client Department says that Inheritance tax laws and the issues which surround them are often complex. If you are unsure how they could affect a recent bereavement please contact him to ensure that you do not pay more tax than you need to.
When Lord Balfour died on 27th June 2003, the estate included farms under the control of his family, farms which had been let out since the 1950s, woodlands and sporting rights, twenty six let houses and cottages and two sets of business premises.
Under Section 105 (3) of the Inheritance Tax Act, a business or interest in a business does not qualify for the relief if the business consists wholly or mainly of operations which deal in securities, stocks or shares, land or buildings or making or holding investments.
In 2009, the First Tier Tax Tribunal allowed an appeal by Lord Balfour’s executors against a determination by HMRC denying business property tax relief in respect of land, houses, and cottages which were let to third parties.
HMRC then appealed to the Upper Tier tax tribunal to reverse the decision, however, the upper court concluded that they were "satisfied that on the evidence before him, Judge Reid was entitled to conclude that section 105(3) did not apply because Lord Balfour's business at Whittingehame Estate did not consist mainly of holding investments”, and that "having decided the questions raised by HMRC against them, we therefore refuse the appeal."
David Maxwell of Seddons' Private Client Department says that Inheritance tax laws and the issues which surround them are often complex. If you are unsure how they could affect a recent bereavement please contact him to ensure that you do not pay more tax than you need to.
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