Glen v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 30 October 1925 |
| Docket Number | No. 8. |
| Date | 30 October 1925 |
| Court | Court of Session |
Lord Blackburn, Lord President (Clyde), Lord Skerrington, Lord Cullen, Lord Sands.
RevenueEstate-dutyReliefRelief in respect of quick succession to an interest in a businessCopartnery between father and sonsLoan by father to partnershipDeath of father and succession of familySon's share of father's loan retained by him in businessDeath of son within two yearsWhether father's loan an interest in a businessWhether father and son interested in the same propertyFinance Act, 1914 (4 and 5 Geo. V. cap. 10), sec. 15.
The Finance Act, 1914, enacts, by sec. 15, that, where estate-duty has become payable on any property consisting of an interest in a business passing on the death of any person, and within five years estate-duty has again become payable on the same property passing on the death of the person to whom the property passed on the first death, the amount of estate-duty payable on the second death in respect of the property so passing shall be reduced.
A father and two of his sons carried on business in partnership. By a re-arrangement of the partnership relations the father accepted a sum of 124,646 in full of his whole rights in the old firm and its assets, and agreed to allow this sum to remain as a loan to the new firm at 4 per cent interest, on condition that, if called up by him, or in any event on his death, it was to be repaid by ten yearly instalments. The father contributed no capital to the new firm apart from the loan, but had an interest in the profits to the extent of a one-tenth share. He died in 1922, leaving a will by which he bequeathed the residue of his estate (including the loan) to his family, in certain shares, and estate-duty was duly paid thereon. The two sons, who continued to carry on the business, thereafter came to an arrangement with their father's executors, under which the sons agreed to repay the loan at once in return for a certain discount; and, in settling with the executors, they retained in the business the respective shares of the loan falling to them, by crediting themselves with the amounts in the books of the firm. Within two years of the father's death one of the sons died, and estate-duty became payable on his estate. His executrix having claimed a reduction, under sec. 15 of the Finance Act, 1914, of the estate-duty payable on the sum credited to the son in the firm's books in respect of his share of his father's loan, the Commissioners of Inland Revenue refused the claim.
In a petition of appeal by the executrix, held (rev. judgment of Lord Blackburn) that section 15 did not apply, in respect that the father's right to repayment of the loan was merely a creditor's right, and not an interest in the business within the meaning of the section; and, further, that the sum standing in the son's name in the books of the firm was an interest in the assets of the firm, and was not identical with his father's interest in the jus crediti of the loan; and petition, accordingly, refused.
On 9th December 1924 Mrs Marguerite Milne Glen, widow and executrix-dative of Robert Muir Glen, calico printer, Glasgow and Caldercruix, presented a petition of appeal under the Court of Exchequer (Scotland) Act, 1856,1 the Finance Act, 1894,2section 10,
and relative Acts, and the Codifying Act of Sederunt, 1913, C. viii. 4, against a decision of the Commissioners of Inland Revenue refusing to allow a deduction, under section 15 of the Finance Act, 1914,*from the estate-duty payable on the death of Robert Muir Glen, of a sum of 3250, being 40 per cent of the duty payable on a sum of 34,109 alleged to represent an interest in the business of John Glen & Sons, calico printers, Glasgow and Caldercruix, which the deceased had inherited from his father John Glen, who had died in 1922, two years before the deceased.
The prayer of the petition was in the following terms:to recall the assessment complained of; to find that the sum of 34,109, or alternatively the sum of 25,245, 4s. 2d., represented the interest in the firm of John Glen & Sons, which transmitted from John Glen to Robert Muir Glen, and thereafter from Robert Muir Glen to the petitioner within the meaning of section 15 of the Finance Act, 1914, and that the petitioner is entitled to a deduction to the extent of 40 per cent of the duty paid by her on the estate of the said Robert Muir Glen amounting to 3343, 6s. 3d. or thereby.
The petition set forth:That the petitioner is the widow and executrix-dative of the deceased Robert Muir Glen, who died intestate on 25th January 1924. For some years prior to his death he was a partner of the firm of John Glen & Sons, calico printers, Glasgow and Caldercruix, under the contract of copartnership after referred to. The partners under the contract were originally John Glen, the said Robert Muir Glen, and Charles Glen. John Glen, who was the father of the other two partners, died on 22nd April 1922, less than two years before the death of the said Robert Muir Glen. The petitioner duly lodged an inventory of the estate of the said Robert Muir Glen, dated 18th March 1924, the amount of the estate subject to duty being therein brought out at the sum of 410,219, 0s. 9d. Estate-duty thereon was paid at the rate of 24 per cent, but subject to deduction of the sum of 3250 aftermentioned. The duty thus paid amounted to 95,202, 1 1s. 4d. In this inventory the value of the deceased's interest in the business of John Glen & Sons was returned at 219,997,12s. 11d. This sum of 219,997,12s. 11d. included an interest in said business amounting to 34,109, which the said Robert Muir Glen inherited from his father, John Glen. It consisted of 7/24th shares of his father's interest in the business. The executrix therefore claimed,
in terms of section 15 of the Finance Act, 1914, to deduct from the estate-duty payable by her the sum of 3250, being 40 per cent of the 24 per cent duty paid in respect of the said 34,109, the additional interest in the business which Robert Muir Glen acquired on the death of his father. Additional estate having been discovered an additional or corrective inventory was lodged by the petitioner on 10th October 1924 showing the total amount of the estate of her husband to be increased to 419,159, 3s. 9d.
| Estate-duty thereon at the rate of 24 per cent is | 100,598 | 4 | 2 |
| The executrix after deducting said sum of | 3,250 | 0 | 0 |
| brought out the net estate-duty as at date of death | 97,348 | 4 | 2 |
| less estate-duty formerly paid | 95,202 | 11 | 4 |
| 2,145 | 12 | 10 | |
| plus interest at 4 per cent for 259 days on 2145,12s. 10d. | 60 | 17 | 11 |
| 2,206 | 10 | 9 |
The appellant therefore tendered and paid to the registrar the sum of 2206, 10s. 9d. additional duty and interest on 10th October 1924. The registrar on 13th October refused to permit the deduction, and claimed that he was entitled, in addition to the 2206, 10s. 9d., to the sum of 3343, 6s. 3d., being the amount of 3250 deducted by the petitioner as aforesaid with interest thereon. The petitioner, feeling aggrieved by the decision of the registrar, appealed to the Commissioners under and in terms of the Finance Act, 1894. The Commissioners having considered the appeal, intimated on 13th November 1924 that they had determined to sustain the decision of the registrar appealed against and to refuse the deduction claimed by the petitioner under section 15 of the Finance Act, 1914. The petitioner has accordingly made payment of the additional assessment, such payment being a condition precedent to her right of appeal. She, however, feels aggrieved by the decision of the Commissioners and humbly submits this petition for review of their finding. At the time of his death the deceased John Glen was, as stated, a partner in said firm of John Glen & Sons. The terms of the partnership are set forth in the formal contract of copartnership between the said John Glen and his then partners, dated 10th December 1914.* The duration of the partnership was ten years
from 1st January 1914. By the terms of said contract of copartnership, the said Robert Muir Glen and Charles Glen were entitled to get ten years to pay out, with 4 per cent per annum of interest till paid, the said John Glen's capital in the business. In addition to interest at 4 per cent on his capital in the business the said John Glen was entitled to one-tenth of the profits of the business during the continuance of the copartnership. At the date of John Glen's death, viz., 22nd April 1922, the sum standing to his credit as a partner in the firm was ultimately ascertained to be 174, 917, 12s. l0d. Estate-duty was paid on that sum. This sum, the petitioner maintains, represents the value of the interest in the business of John Glen & Sons which passed on the death of the said John Glen within the sense and meaning of the Finance Act, 1914. Under John Glen's will, his two sons, Robert Muir Glen and Charles Glen, and his daughter, Mrs Grace Glen or Donaldson, were appointed executors, and duly confirmed as such. They are also the residuary legatees, each is entitled to share in residue to the extent of 7/24th shares. The estate-duties paid on John Glen's estate were 137,957,17s. 9d. The total amount of legacies, death-duties, debts, and expenses payable out of John Glen's total estate of 419,159, 3s. 6d. was 175,851. The proportion of that sum of 175,851 applicable to the sum of 174,917, 12s. 10d. (viz., the interest of John Glen in his firm) is 57,970. This reduces John Glen's net interest in the firm passing to the residuary legatees to a sum of 116,948. The share of 7/24ths of this sum of 116,948 falling to Robert Muir Glen in accordance with the residuary bequest above mentioned is 34,109. The estate of the said John Glen was not realised except to the extent necessary to pay death-duties, debts, legacies, and expenses; otherwise it was, as directed by the testator, divided among, and transferred in specie to, the
residuary legatees in terms of the will. In doing so the...
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