Fitzwilliam (Countess) and Others v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 19 February 1992 |
| Date | 19 February 1992 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Nourse, Lord Justice Staughton and Sir Christopher Slade
Capital transfer tax - avoidance scheme - legality
An elaborate scheme devised by solictors and counsel to avoid liability to capital transfer tax following the death of Earl Fitzwilliam was effective and achieved its purpose.
The five successive steps taken to implement the scheme, evolving around the settled property provisions of Schedule 5 to the Finance Act 1975, were not pre-ordained and thus could not constitute a single composite transaction so that the anti-avoidance principles laid down by the House of Lords in Ramsay (W T) Ltd v IRCELR ([1982] AC 300) could not be applied to the scheme.
The Court of Appeal so held in reserved judgments dismissing an appeal by the Crown from the judgment of Mr Justice Vinelott (The Times November 22, 1989; [1990] STC 65) that had allowed appeals by the executors/trustees of Earl Fitzwilliam's estate from a decision of the special commissioners that had upheld notices of determination that tax was chargeable as if amounts of £4 million from the estate had been appointed to Lady Fitzwilliam absolutely and £3.8 million to her daughter, Lady Hastings, absolutely.
Earl Fitzwilliam died in 1979. His estate, valued at some £12 million, was directed to be held on trust, the trustees having discretion to appoint among a class of beneficiaries that included the Earl's widow, Lady Fitzwilliam, then aged 81, and Lady Hastings.
On the trustees' instructions and with the assistance of counsel, the family solicitors in November 1979 embarked on certain transactions that sought to utilise (i) the surviving spouse exemption in Schedule 6 to the Finance Act 1975; (ii) the exemption for deeds of family arrangements within two years of death in section 47(1A) of the Finance Act 1975, as introduced by section 121 of the Finance Act 1976; (iii) the mutual transfer provisions in sections 86 and 87 of the Finance Act 1976; (iv) provisions for the termination of an interest in possession in paragraph 4 of Schedule 5 to the Finance Act 1975; and (v) the revertor to settlor provisions in section 22(2) and paragraphs 4(5) and 1(6) of Schedule 5. The scheme was fully implemented by February 1980.
The commissioners concluded that the transactions were the essential steps taken to implement the avoidance scheme that satisfied the Ramsay principle and...
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