United Kingdom Special Commissioners of Income Tax Decisions

SPC00464

INHERITANCE TAX – whether gift of house by proprietary estoppel taking effect before actual transfer into joint names – no – appeal dismissed

THE SPECIAL COMMISSIONERS

BRIAN MOGGS Appellant

(ONE OF THE EXECUTORS OF ALLEN VICTOR MOGGS DECEASED)

- and -

THE COMMISSIONERS OF INLAND REVENUE Respondents

Special Commissioner: DR JOHN F. AVERY JONES CBE

Sitting in public in London on 25 February 2005

The Appellant in person

Peter Twiddy, Assistant Director, Inland Revenue: Capital Taxes , for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. This is an appeal against an Notice of Determination dated 22 March 2004 that:

   "In relation to the transfer of a half share in 17 Western Road, Brightlingsea, Colchester, Essex CO7 0HZ ("the Property") in August 2000 to Miss Sandra Green that having regard to the provisions of s 3(1) Inheritance Tax Act 1984, the value of the estate of Allen Victor Moggs who died on 5 April 2001, immediately before the transfer included the entirety of the property with vacant possession."

   Mr Brian Moggs, the deceased's son and co-executor of the Deceased with Miss Green, appealed the Notice, although she did not. He appeared in person; Mr Peter Twiddy appeared for the Revenue.

2. The issue in the appeal is that Mr Moggs contends that the gift of the Property (or a share in it) was made earlier than August 2000. Mr Twiddy took a neutral stance contending that on the facts as he knew them this had not been established.

3. I heard evidence from Miss Sandra Green and find the following facts:

   (1) Miss Green is the Deceased's niece. In 1996 she separated from her husband and was staying with friends. The Deceased, whose wife had died in April 1996, invited her to stay with him. He wrote to her on 23 May 1996 proposing the following arrangement:

   "1. You and your dog live here with me until the end of March 1997 unless either one of us cannot tolerate the other. For example we may find that we are incompatible.

   If we get on well together and there are no external influences which might conceivably drive us apart then we could negotiate a linger period together.

   There are no strings. No unreasonable expectations. We just agree to do our best to work together…".

   (2) We do not have a copy of her reply but he wrote again on 31 May 1996 confirming that her cat was also welcome and saying:

   "Board and Lodging. Certainly NOT. You will be my guest and as member of my family there can be no payment. In any case, your very presence here and the support you will be giving me will more than pay your keep. My main concern is that you get on you feet again and become independent and free of all encumbrances as soon as possible. Treasure your freedom…".

   (3) Every year the Deceased and Miss Green used to have a meal together and extend the arrangement by another year. She regarded this as a formality.

   (4) The Deceased drafted a will in 1996 (Mr Moggs believes November) stating that providing Miss Green was still permanently resident in the Property at his death she could continue to reside there for her life. This was never executed.

   (5) The Property was small and had originally been purchased as a weekend home to which he had retired. There was one bedroom and a study upstairs. She lived in the dining room on the ground floor. The Deceased had an extension built between July 1997 and sometime in 1998 providing a larger sitting room on the ground floor and a bedroom and en suite bathroom for her above. Immediately before carrying out this work the Deceased asked her to confirm that she would continue to live there.

   (6) Miss Green's divorce was finalised in November 1999. The Deceased had previously discussed making provision for her after his death. She thought that the Deceased would probably have made the transfer of a joint interest in the Property earlier if it had not been for her divorce, as he did not want the existence of the asset to prejudice her claims on the divorce.

   (7) The Deceased was diagnosed as having prostate cancer in February 2000.

   (8) The Deceased, accompanied by Miss Green, consulted a solicitor in April 2000 as a result of which on 3 August 2000 he transferred to Miss Green by gift a half interest in the Property as joint tenant (the delay was caused by amalgamating the title to the Property and the property next door that he has previously purchased). On the same day he signed his last will leaving (in case for any reason she did not take by survivorship) his share in the Property to her. The inheritance tax on the gift and legacy was payable out of the estate, which was left to Mr Moggs. The transfer contained a statement that "The transferor is solely and beneficially interested in the property." This clearly relates to the position before the transfer and was presumably made because the property was still registered in his and his deceased wife's names as joint tenants.

   (9) The Deceased transferred his savings account into joint names with Miss Green in May 2000 so that she would have access to immediate funds on his death. From 1996 she had power to sign on one of his bank accounts as a convenience.

   (10) Miss Green would refer to the Property as "our house" with the Deceased's encouragement. She considered that she could stay as long as she wished. She did not consider that she had any rights in the Property before the transfer.

4. Mr Moggs contends that the Deceased's actions, particularly in making the draft will, the interest that he took in her future, his providing for her, and enlarging the Property to give Miss Green a room of her own, show that he was making a gift to her of an interest in the Property on the basis of proprietary estoppel on account of her "commitment of care" to him (an expression that she had used in a letter to him of 9 May 2001). He referred to Re Basham deceased [1996] 1 WLR 1498 and Greasley v Cook [1980] 1 WLR 1306 that had been provided by Mr Twiddy.

5. Mr Twiddy accepts the possibility that the deceased made a promise to Miss Green relating to the Property which would have the effect of the Deceased making an earlier gift. The question for me is whether such an earlier gift is established on the facts.

6. The letters written by the Deceased when she first came to stay are interesting as they indicate that he was a meticulous person who liked to sort out such matters clearly without leaving them to chance in a way that is common with arrangements within families. The annual renewal of the arrangement for a further year, even though they were regarded as a formality, gives the same indication. If he had made a promise to Miss Green that in return for looking after him she would have an interest in the Property I would expect him to have said so clearly and recorded it in writing. Miss Green herself did not consider that she had rights over the Property which is indicative that the Deceased did not make any such promise. As one would expect of such a person when he did decide to make her a joint tenant of the Property he discussed it with her, waited until after her divorce, consulted a solicitor and tied the gift in with a new will that provided for the incidence of inheritance tax on the gift.

7. There are also a number of contrary indications. The draft will of November 1996 shows that he was then considering leaving her a life interest in the property by will if she was still living there at the time of his death. This demonstrates that at that time he had not promised her any interest in the Property in his lifetime. She considered that she could stay as long as she wished which is an indication of a contractual arrangement rather than an interest in the Property that would continue after his death. Discussing making provision for her but delaying making the transfer while her divorce was pending also indicates that he had not made any previous gift. When he put the Property into joint names he stated in the transfer that: "The transferor is solely and beneficially interested in the property." While this may be explained by the fact the Property was still registered in the joint names of him and his deceased wife, it is still an indication that the transfer was not giving effect to a previous gift, or at the very least that neither the Deceased nor Miss Green, who had accompanied him to the solicitor, had mentioned it to the solicitor. I also regard the fact of the transfer of the Property into joint names as a slight indication that it was unlikely that any arrangement had previously been made that would found a claim to proprietary estoppel; normally in such cases there is no subsequent actual transfer. The enlargement of the Property for her benefit does not in my view indicate that she was being given an interest in the Property. It is equally consistent with the Deceased retaining the whole ownership interest in the Property. At most one can say that it shows that he was well disposed to Miss Green but this is far from saying that he had promised her some interest in the Property.

8. I therefore find that there was no earlier gift. I dismiss the appeal and confirm the Determination.

   JOHN F. AVERY JONES

   SPECIAL COMMISSIONER

   RELEASE DATE: 3 March 2005

   SC 3079/04