Inland Revenue Commissioners v Arkwright and another

Inheritance tax — Valuation of deceased’s interest in property — Whether special commissioner required to refer valuation questions to Lands Tribunal — Appeal allowed The deceased and his wife owned a property as tenants in common in equal shares. On the death of the deceased, his interest in the property vested in his daughters, the respondents, and it therefore had to be valued for inheritance tax purposes. The Revenue issued notices of determination to the effect that, under sections 160 and 161(4) of the Inheritance Tax Act 1984, the value of the deceased’s interest was a mathematical one-half of the vacant possession value of the property. The respondents, acting as the deceased’s personal representatives, appealed to the special commissioner. They contended that, at the date of death, the wife’s undivided half-share in the property had been more valuable than the deceased’s share. The special commissioner took the view that section 161(4) was not applicable to the case, and went on to find as a fact that the deceased’s interest in the property was less than a mathematical one-half of the vacant possession value. In reaching that conclusion, she considered that the deceased’s interest should be valued by taking into account the wife’s rights of occupation, conferred by the Trusts of Land and Appointment of Trustees Act 1996, and the decrease in value of the deceased’s interest occurring by reason of his death. On appeal, the Revenue contended that the special commissioner did not have the jurisdiction to determine the value of the deceased’s interest, and that she should have referred the question of valuation to the Lands Tribunal. Held: The appeal was allowed. The special commissioner had been entitled to determine the question of law as to the applicability of section 161(4). However, having found that it did not apply, and that the deceased’s interest was not a mathematical half share, she should not have gone on to determine that his interest was, as a matter of fact less than a mathematical half-share. That was properly an issue that should have been referred to the Lands Tribunal for determination. The special commissioner had also erred in finding that, when valuing the deceased’s interest, it was necessary to take into account of both the wife’s rights and a reduction in value attributable to the death of the deceased. Whether a notional purchaser of the deceased’s share might take the existence of the wife’s rights into account and, if so, how that would affect the value, was a question that the Lands Tribunal should decide on appropriate evidence. Likewise, the question whether the deceased’s death had reduced the value of his interest was essentially a question of fact for determination as a valuation issue by the Lands Tribunal. Kate Selway (instructed by the solicitor to the Inland Revenue) appeared for the appellants; Jolyon Maugham (instructed by Hague Lambert of Manchester) appeared for the respondents. Sally Dobson, barrister