United Kingdom Special Commissioners of Income Tax Decisions

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You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Thomson v Inland Revenue [2004] UKSC SPC00429 (08 September 2004)
URL: http://www.bailii.org/uk/cases/UKSPC/2004/SPC00429.html
Cite as: [2004] UKSC SPC00429, [2004] UKSC SPC429

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Thomson v Inland Revenue [2004] UKSC SPC00429 (08 September 2004)

SPC00428

Inheritance Tax Act 1984 Section 221; Notice of Determination in relation to heritable property

THE SPECIAL COMMISSIONERS

ROBERT HAY LINDSAY THOMSON Appellant

- and -

THE COMMISSIONERS OF INLAND REVENUE Respondents

Special Commissioner: J GORDON REID Q.C., F.C.I.Arb.

Sitting in Edinburgh on 28th July 2004

for the Appellant In person

for the Respondents Peter R Twiddy, Assistant Director, Capital Taxes Office

© CROWN COPYRIGHT 2004


 


DECISION

Introduction

1. This is an appeal against a Notice of Determination, dated 13^th February 2004 under section 221 of the Inheritance Tax Act 1984 (the "Act") by Mr RHL Thomson. It relates to the heritable property known as "Redarch", 10 Langtree Avenue, Whitecraigs, Glasgow where Mr Thomson resides. The issue in this appeal is whether the Notice correctly determined that, for the purposes of inheritance tax on the death of Mr Thomson's sister, Jane Agnes Thomson, who died on 2^nd September 2002, her estate included the whole of that property.
2. Mr Thomson appeared on his own behalf. He did not give evidence as such but provided a considerable amount of background information, much of which was not disputed by Mr Twiddy, who appeared on behalf of the Respondents (the "Revenue"). The Revenue did not lead evidence but produced a file of correspondence and related papers. The authenticity, and where appropriate, the transmission and receipt of the documents thus produced were not in issue.

Factual Background.

3. Mr Thomson is a retired manufacturer's agent in the textile business. He is 87 years old. He retired in 1970. He is unmarried and lives in the Thomson family home "Redarch", 10 Langtree Avenue, Whitecraigs, Glasgow. He has resided there for many years. His father had the house built in 1924. Mr Thomson's father died in 1957 and his mother died in 1971. Before his father's death, Mr Thomson promised him that he would look after his mother and sister and maintain the family home.
4. The estate of Mr Thomson's mother was wound up by a solicitor named Robert Lindsay Liddell, who was her executor nominate. He too is dead. In her Will, she bequeathed the family home to her daughter, Jane. Liddell, as Executor nominate transferred the title to the family home to Jane Agnes Thomson. He granted a Disposition in her favour on 2/2/72 which was registered in the General Register of Sasines on 3/2/72. When Jane Agnes Thomson, a spinster, died on 2/9/02 she was the heritable proprietrix of the family home. Her title thereto was valid and unimpeachable. No attempt has ever been made to set it aside.
5. For reasons which are unclear, Mr Thomson's share in his mother's estate was paid by the solicitor Liddell, to Mr Thomson's sister. According to Mr Thomson, Liddell embezzled part of the estate.
6. Following Miss Thomson's death, Mr Thomson was appointed executor-dative on 7/11/02. His solicitors, Messrs Campbell Riddell Breeze Paterson, solicitors, Glasgow, prepared an Inventory of Estate, signed by Mr Thomson, for the purposes of Confirmation. The family home was included in the Inventory and valued at £285,000. The total value of Miss Thomson's estate for the purposes of Confirmation was £355,529.44. In the usual way Form IH200 was completed and submitted, on 12/12/02, to the Capital Taxes Office, Edinburgh. This disclosed an aggregate chargeable transfer of £341,552.44 and total liabilities at the death of Miss Thomson of £13,977.00. The total of these two sums is the sum of £355,529.44. The sum of £341,552.44 was rounded up to £341,553.00. The Inheritance Tax calculated as payable was £36,621.11 and this was paid when the Form was submitted. Mr Thomson is entitled to the whole of Miss Thomson's estate after deduction of tax and other liabilities.
7. In form IH200 the sum of £13,977 was made up of two components. The first was £12,233 and was described as sums paid by Mr Thomson as maintenance costs relating to the family home under reference to a manuscript sheet entitled "Maintenance Costs 1945-2002". The second was a funeral account of £1,744.00.
8. The maintenance costs sheet set forth about twenty two items between the period 1947 (not 1945) and May 2002. These items included various works of repair, renewal and improvement such as floor tiling, rewiring the house, the installation of central heating, and the replacement of the cold water cistern and hot water tank. There was also a general item for internal painterwork to which no sum was allocated. There are no items listed between 1986 and 2000. The items listed between 2000 and 2002 amount in total to £7,593. Mr Thomson has, through his occupancy of the family home during this whole lengthy period, enjoyed the benefit of all the works carried out. The fact that it has been properly maintained is reflected in the subsequent value of the family home on Miss Thomson's death.
9. Following the submission of Form IH200 a dispute arose with the Capital Taxes Office. They refused to give credit for the claim for the sum of £12,233 mentioned above. They also rejected a claim for £7,303.96 being the sum which should have been paid to Mr Thomson when his mother's estate was wound up. That latter claim was eventually accepted by the Capital Taxes Office and no more need be said about it at this stage.
10. Mr Thomson took matters up in correspondence with the Capital Taxes Office. He appeared to accept that no allowance should be given for the sum of £12,233 but had difficulty following the consequential recalculation of the Inheritance Tax due. In correspondence with Mr Thomson, the Capital Taxes Office and Mr Twiddy, in particular have fully, clearly, carefully and correctly explained how the figures have been arrived at.
11. However, Mr Thomson also challenged the fact that his sister was the owner of the whole of the family home. This was on the basis that his sister had not signed any document accepting the title to the house. This challenge is the reason for the issue of the Notice of Determination referred to at the outset of this Decision.
12. At the Hearing Mr Thomson gave a full, clear and interesting account of the reasons underlying this challenge. During the Second World War, Mr Thomson joined the Navy. He was one of several seamen singled out, in about 1942, for a special mission, namely to recover for the purposes of the invasion of mainland Europe, naval charts, from German fishing vessels, of the coastal waters off the Netherlands and Belgium. The plan was that the German vessels would be boarded, the crew killed and the charts recovered. To that end Mr Thomson was trained to kill in unarmed combat. In the event, he never used his special skills and the mission was abandoned. He kept all this a secret from his family and, in particular, his sister. However, one day, in about 1948, one of his crew members visited the family home and let the cat out of the bag. Mr Thomson's sister was horrified.
13. In about 1971, following the death of his mother, his sister had a row with the solicitor Liddell. She refused to disclose the nature of the row. Mr Thomson suspected that his sister told Liddell that she would not accept ownership of the whole of the family home but that Liddell refused to make the necessary changes to the distribution of the estate. Mr Thomson considered that his sister refused to tell him about the problem because of her knowledge of his special training in unarmed combat. According to Mr Thomson, she feared he would go to Liddell's office and kill him.

Decision

14. The appeal relates and relates only to the Notice of Determination which is concerned with the ownership of the family home immediately preceding the death of Mr Thomson's sister (see generally Inheritance Tax Act 1984 sections 2-5 and 221). Having regard to the factual background, there is no room for argument whatsoever that Miss Thomson was not the owner of the whole of the family home immediately preceding her death. She was; and accordingly the family home in its entirety forms part of her estate for the purposes of Inheritance Tax. The appeal against the Notice of Determination must therefore be refused. The explanations and suspicions given and held by Mr Thomson, which I accept as genuine and well intentioned, are not relevant as a matter of law. The title to the property is the ruling consideration. The evidence or factual background does not disclose any basis for concluding (even if it were permissible for me to do so) that it was held in trust or fell to be set aside in some way.
15. The other issue canvassed at some length at the Hearing was the calculation of the Inheritance Tax payable. Strictly speaking, this should form no part of the appeal. However, the Hearing was conducted on a fairly informal basis and Mr Twiddy was content that this matter should be aired at the Hearing and that I should express a view on it.
16. When form IH200 was submitted the value of the estate on which tax was chargeable was said to be £341,553. This was arrived at after deducting the sum of £12,233 (the maintenance costs claim). Had no such claim been made, the value of the estate on which tax was chargeable would have been £353,786. The claim has been disallowed, so the starting point for the charging of tax must be increased to £353,786.
17. In the course of negotiations and correspondence, other adjustments and recalculations fell to be made. One of these was the claim Mr Thomson was making against the estate for £7303 in respect of his entitlement on his mother's death. The result of the adjustments and recalculations was that the sum of £8,419.05 fell to be deducted from the sum of £353,786. This leaves a figure of £345,366.95 on which Inheritance Tax and interest fall to be paid. In the original Form IH200, tax was calculated on the basis of the lower sum of £341,553. That explains why, following negotiation and adjustment, some extra tax had to be paid.

Result

18. The appeal against the Notice of Determination dated 13/2/04 is dismissed. No expenses are found due to or by either party.

J GORDON REID Q.C., F.C.I.Arb.

SPECIAL COMMISSIONER

Release Date: 8 September 2004

SC3038/04