D'Abreu v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 07 March 1978 |
| Date | 07 March 1978 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Surtax and special charge - Income and Corporation Taxes Act 1970 (c 10), ss 37, 437, 442 & 444 - Release and assignment of life interest of unmarried sister in funds partly brought into settlement by her deceased father and partly by herself by deed - Release and assignment by married sister of reversionary life interest by deed - Whether, after death of unmarried sister, the sisters were joint settlors - If so, whether income provided directly or indirectly by unmarried sister and/or her father.
Patrick Bowes Lyon ("Patrick") made a settlement ("the 1934 settlement") in favour of his daughters Jean and Ann with cross remainders; each had a special power of appointment by deed or will in favour of her children who in default of appointment took in equal shares; with a general power of appointment by will of the survivor, if both died without a child who attained a vested interest.
Jean made a settlement ("the 1940 settlement") by which she disposed of the absolute interest (which would accrue if she survived Ann and neither she nor Ann had a child who attained a vested interest) and added her half share of certain policies on the life of her father to the moiety of the trust fund in which she had a life interest.
Patrick died on 5 October 1946; by that date Ann had married and had one child; two further children were subsequently born to her. By Patrick's will his residuary estate (after the death of his wife) was to be held on the trusts of the 1934 settlement.
In 1959, by deed, Jean released her right to appoint in favour of a surviving husband and released to the trustees her life interest in her moiety under the 1934 settlement and her life interest in the 1940 settlement. Ann released and assigned to the trustees of the 1934 settlement (Ann and M.B. Yeatman) her contingent reversionary life interests in the first moiety of the 1934 settlement and her contingent reversionary life interest under the trusts declared by the 1940 settlement. On the following day Ann exercised her power of appointment under the 1934 settlement in favour of her 3 children. On 7 January 1963 Jean died without ever having been married.
The Crown assessed to surtax (and special charge) the income paid to Ann's infant children in the period following Jean's death in accordance with s 37, Income and Corporation Taxes Act 1970, on the basis that it was income paid to them "by virtue or in consequence of any settlement" (i.e. Ann's disposition in 1959 of her contingent reversionary interest) within the meaning of s 437 of the same Act.
The taxpayer contended that Buchanan v. Commissioners of Inland Revenue37 TC 365; [1958] Ch 289 was distinguishable; alternatively Jean and Ann effected their dispositions jointly, so that s 442 applied and the income in question was not provided by Ann because it did not originate from her.
Accordingly Ann's annual liability should be limited to the value of the interest she surrendered. The Crown contended that Buchanan(1) was indistinguishable: that Ann was the sole settlor of the relevant "settlement" by which the income was payable to the children: and that even if the provisions of s 442 applied such income was all provided directly or indirectly by Ann within s 442(4) (b). The Special Commissioners accepted the Crown's arguments and dismissed the appeals.Held,
Held, dismissing the appeal, that the Special Commissioners had rightly rejected all the taxpayer's contentions.
Stated under the Taxes Management Act 1970, s 56, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 16 and 17 December 1976 Colonel Francis Arthur d'Abreu (hereinafter called "the Appellant") appealed against the following assessments to surtax and special charge:
| £ | |
| 1962-63 | 500 Further |
| 1964-65 | 9000 Further |
| 1965-66 | 27,000 Main |
| 1966-67 | 24,000 Main |
| 1967-68 | 9666 Further |
| 1968-69 | 8064 Further |
| 1969-70 | 3825 Further |
| 1970-71 | 2287 Further |
| Special charge | 24,740 Further |
2. Shortly stated, the question for our decision was whether the income payable and paid to the minor children of the Appellant and his wife by virtue and in consequence of a deed of release and assignment of 2 July 1959 and a deed of appointment of 3 July 1959 should be treated as the Appellant's income under ss 37 and 437 of the Income and Corporation Taxes Act 1970.
3. The following documents were proved or admitted before us:
-
(2) Deed of settlement dated 9 February 1934 between the Honourable Patrick Bowes Lyon of the one part and Margaret Ann Bowes Lyon, Alfred Jessup and Malcolm Bardsley Yeatman of the other part (exhibit 1).
-
(3) Deed of settlement dated 10 August 1940 between Jean Barbara Bowes Lyon of the one part and Margaret Ann Bowes Lyon, Alfred Jessup and Malcolm Bardsley Yeatman of the other part (exhibit 2).
-
(4) Probate copy of the will of the Honourable Patrick Bowes Lyon deceased dated 6 May 1947 (exhibit 3).
-
(5) Deed of release and assignment of 2 July 1959 between Jean Barbara Bowes Lyon of the first part, Margaret Ann d'Abreu of the second part and Margaret Ann d'Abreu and Malcolm Bardsley Yeatman of the third part (exhibit 4).
-
(6) Deed of appointment dated 3 July 1959 by Margaret Ann d'Abreu (exhibit 5).
-
(7) Deed of appointment dated 25 November 1974 by Margaret Ann d'Abreu (exhibit 6).
-
(8) Letter dated 29 July 1970-H.M. Inspector of Taxes, Stepney to accountants for the Appellant.
-
(9) Letter dated 8 January 1971-Solicitors for the Appellant ("Solicitors") to H.M. Inspector of Taxes, Stepney.
-
(10) Letter dated 29 June 1971-Chief Inspector of Taxes (Claims) ("CI (Claims)") to Solicitors.
-
(11) Letter dated 17 August 1971-Solicitors to CI (Claims).
-
(12) Letter dated 29 October 1971-CI (Claims) to Solicitors.
-
(13) Letter dated 17 February 1972-Solicitors to CI (Claims).
-
(14) Letter dated 31 October 1972-CI (Claims) to Solicitors.
-
(15) Letter dated 4 May 1973-Solicitors to CI (Claims).
-
(16) Letter dated 5 August 1975-Accountants for the Appellant to Surtax Office.
-
(17) Letter dated 5 December 1975-Surtax Office to accountants for Appellant.
-
(18) Letter dated 26 July 1976-Solicitors Office, Inland Revenue to Solicitors, with attached form SL 209 and particulars of assessments for determination.
-
(19) A statement of agreed facts.
Copies of such of the above as are not annexed hereto as exhibits are available for inspection by the Court if required.
4. The following facts were admitted or agreed between the parties:
-
(2) The two daughters of Patrick Bowes Lyon namely Jean Barbara Bowes Lyon and Margaret Ann Bowes Lyon (who was later married to the Appellant) were born on 9 October 1904 and 19 June 1906 respectively.
-
(3) On 9 February 1934 Patrick Bowes Lyon made a settlement ("the 1934 settlement") (exhibit 1) in favour of his two daughters Jean Barbara Bowes Lyon ("Jean") and Margaret Ann Bowes Lyon ("Ann"). The trustees were to hold one moiety for Jean for her life and one moiety for Ann for her life. After the deaths of Jean and Ann their children were to take their mother's share as their mother should appoint, or in default of appointment equally. If either Jean or Ann were to die without issue her moiety would be held on the trusts of the other moiety; and if both were to die without issue the whole fund would pass to such persons as the survivor of Jean and Ann might appoint, and in default of appointment to the survivor absolutely.
-
(4) Also on 9 February 1934 Patrick Bowes Lyon assigned to Jean and Ann equal absolute interests in certain policies on his life. (This assignment is not included in the exhibits but is referred to in recital (3) of the 1940 settlement (exhibit 2).)
-
(5) On 20 June 1934 Patrick Bowes Lyon executed his last will (exhibit 3) by clause 6 of which his residuary estate after the death of his wife was to be held on the trusts of the 1934 settlement. In the events which have taken place neither of the two codicils to the will have affected clause 6.
-
(6) On 10 August 1940 Jean made a settlement ("the 1940 settlement") (exhibit 2) by which (a) the absolute interest to which she would have become entitled on her surviving Ann and Ann having no issue should (see clauses 2 to 10) if it accrued, and after her death, be used to maintain Glamis Castle; and (b) her general power of appointment by will conferred upon her as survivor by the principal settlement should (see clause 3) be released; and (c) her share of the policies on the life of Patrick Bowes Lyon assigned to her and Ann on 9 February 1934 should (see clauses 11 to 15) be held on the trusts relating to her moiety set out in clause 4 of the 1934 settlement. These policies or the assets representing the proceeds thereof are subsequently referred to as "the 1940 settled property".
-
(7) On 17 March 1946 Anthony Patrick John ("Anthony"), the eldest child of Mr. and Mrs. d'Abreu, was born.
-
(8) On 5 October 1946 Patrick Bowes Lyon died and probate of his will was granted on 6 May 1947 (document 3).
-
(9) On 7 February 1948 Francesca Ann ("Francesca"), the second child of Mr. and Mrs. d'Abreu, was born.
-
(10) On 16 February 1950 Anna Teresa ("Anna Teresa"), the third child of Mr. and Mrs. d'Abreu, was born.
-
(11) On 2 July 1959 Jean and Ann together executed a deed of release and assignment (exhibit 4) whereby (a) Jean released her moiety under the 1934 and 1940 settlements from her power to appoint in favour of a husband; (b) Jean released and assigned to the trustees her life interest in her moiety under the 1934 settlement and her life interest in the 1940 settlement; (a) Ann released and assigned to the trustees her contingent reversionary life...
To continue reading
Request your trial
-
Fitzwilliam (Countess) and Others v Commissioners of Inland Revenue
...cited in argument in addition to those referred to in our decision:Pilkington & Anor v IR CommrsELR [1964] AC 612.D'Abreu v IR CommrsTAX (1978) 52 TC 352.Commr of Inland Revenue (New Zealand) v Challenge Corp LtdTAX[1986] BTC 442.Bird & Ors v IR Commrs TAX[1987] BTC 168.IR Commrs v Duke of ......