Taxation – Inheritance tax – Statutory relief – Administrators entering into contract for sale of freehold interest in property forming part of deceased’s estate – Contract not completed – Property not sold within three years of testator’s death – Whether administrators entitled to claim relief under Chapter IV Part 6 of Inheritance Tax Act 1984 – Revenue determining administrators not entitled to relief – Appeal dismissed
In June 1988 the deceased died owning a property valued for probate purposes at £447,000. In June 1991, the deceased’s son as administrator of the estate entered into a contract to sell the property for £300,150 (the 1991 contract). Although notice to complete was served on the purchaser, the contract was subsequently either rescinded or treated as discharged and the deposit was forfeited. After the death of the deceased’s son, the plaintiffs became the administrators of the estate and in January 1992 they entered into a contract to sell the property for £400,000. The contract was duly completed. In May 1995 the probate value was agreed at £447,000.
The Revenue determined that the plaintiffs were not entitled to relief under Chapter IV Part 6 of the Inheritance Tax Act 1984 and that the value of the property for inheritance tax purposes was the probate value of £447,000. The plaintiffs appealed and sought a declaration that the value of the freehold interest in the property was the sale price agreed in the 1991 contract. They contended that the 1991 contract had amounted to a ‘sale’ within the scope of section 191 of the 1984 Act, made within three years of the death of the owner, and that accordingly they were entitled to relief and therefore the value of the property was to be taken as the sale price of £300,150 as agreed in the 1991 contract.
Held The appeal and application were dismissed.
The focus of sections 190-198 of the 1984 Act was on the interest being ‘sold’ and thus a sale was a precondition to any relief. Although under the 1991 contract the equitable title had passed because the contract had been legally enforceable, in the context of sections 190-198 ‘sold’ meant ‘conveyed or transferred on completion of a sale’ and accordingly a sale contemplated by the section was either the sale of the legal title on completion or the equitable title on execution of the contract. The plaintiffs were not therefore entitled to relief.
David Parry (instructed by Ellison & Co) appeared for the plaintiffs; Michael Furness (instructed by the solicitor to the Inland Revenue) appeared for the Crown.
