Frankland v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 07 November 1997 |
| Date | 07 November 1997 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Peter Gibson, Lord Justice Thorpe and Lord Justice Chadwick
Inheritance tax - share transfer into new settlement - tax relief benefit lost
A transfer of shares from a deceased's estate subject to a discretionary trust into a new settlement if made within the first quarter after the death meant that the benefit of tax relief under section 144 of the Capital Transfer Tax Act 1984 was lost.
The Court of Appeal so stated when dismissing an appeal by John Frankland against the order of Mr Justice Rattee on May 9, 1996 ([1996] STC 735), confirming the determination dated October 12, 1995 of the Commissioners of the Inland Revenue that a deemed transfer of value of certain shares on the death of Christine Rawlinson on September 26, 1987 was not an exempt transfer.
Mr Frankland was the sole surviving executor and trustee of the will of the deceased. By that will she had created a discretionary trust of which her husband was a beneficiary. The widower was the other executor and trustee.
On December 22, 1987 the trustees transferred shares forming part of the deceased's estate subject to that trust out of the trust and into a new settlement to the income of which the widower was entitled for his life.
The trustees thereby sought to effect a substantial reduction of the inheritance tax payable on the deceased's estate at her death. They hoped to obtain the relief made available by section 144 of the 1984 Act.
Section 144 provides:
"(1) This section applies where property comprised in a person's estate immediately before his death is settled by his will and, within the period of two years after his death and before any interest on possession has subsisted in the property, there occurs - (a) an event on which tax would (apart from the section) be chargeable under any provision, other than section 64 or 79…of this Act, or (b) an event on which tax would be chargeable but for section 75 or 76…"
Mr Christopher McCall, QC...
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