Hart (HM Inspector of Taxes) v Briscoe and Others
| Jurisdiction | England & Wales |
| Judgment Date | 24 November 1977 |
| Date | 24 November 1977 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Capital gains tax - Settled property - Advancement of assets on trust - Whether trustees can become "absolutely entitled…as against the trustee" - Whether deemed disposition by trustees - Finance Act 1965 (c 25), s 25(3) - Finance Act 1969 (c 32), Sch 19, para 9.
(1) In the first case, by virtue of a settlement and a conveyance, both made by B in 1955, certain assets were held on discretionary trusts. On 6 April 1972 B made a further settlement and on that day the assets then subject to the trusts of the 1955 settlement were (in effect) advanced by trustees of the 1955 settlement to themselves as trustees of the 1972 settlement.
An assessment to capital gains tax for the year 1972-73 was made on the footing that on 6 April 1972 the trustees of the 1955 settlement were deemed under s 25(3), Finance Act 1965, to have disposed of and immediately reacquired the assets so advanced. On appeal, it was contended that the effect of the exercise of a power of advancement was indistinguishable from the effect of the exercise of a special power of appointment and that the trusts of the 1972 settlement must be read back into the 1955 settlement with the consequence that there was a single settlement. For the Crown it was contended that the effect of the exercise of the power of advancement was that the assets advanced ceased to be held on the trusts of the 1955 settlement and were thenceforth held on the trusts of the 1972 settlement. The Special Commissioners upheld the trustees' contentions.
In the High Court a preliminary point arose as to whether the assessment was valid, the same having been made on three individuals "As Trustees of Mrs. L. M. Barne's Discretionary Settlement dated 6/1/1955" when in fact those individuals were trustees of the 1972 settlement but not of the 1955 settlement.
Held, (on the preliminary point), that, on the facts of the case, the defect in the assessment was cured by s 114(1), Taxes Management Act 1970, since (no person having been deceived or misled thereby) (a) the assessment was intended to be one on the trustees of the 1955 settlement and as such would be "in substance and effect in conformity with or according to the intent and meaning of the Taxes Acts" and (b) the persons "charged or affected thereby" were "designated therein according to common intent and understanding".
Dictum of Megarry J. in Fleming v. London Produce Co. Ltd. 44 TC 582, at page 597; [1968] 1 WLR 1013, at page 1028, applied.
Held, (on the substantive issue), allowing the Crown's appeal, that the question whether a disposition which exercises a fiduciary power is to be viewed as a separate settlement or as part of a single fiduciary arrangement headed by the disposition which created the power, must be answered in the context of the circumstances of the particular case; that, on the facts of the case, the 1955 settlement came to an end on 6 April 1972 in relation to the advanced assets; that the advanced assets then ceased altogether to be subject to the 1955 settlement; and that, whereas prior to the advance the assets were subject to a single settlement consisting of the 1955 settlement, thereafter they were subject to a single settlement consisting of the 1972 settlement.
(2) In the second case, in the events which had happened, a fund was held upon certain trusts and the trustees, in pursuance of a power conferred on them, executed declarations of trust by which they declared that certain of the assets forming part of the fund should be held by themselves upon new trusts.
The trustees of the fund, in their capacity as such, were assessed to capital gains tax for the year 1972-73 on the footing that on the execution of the declarations of trust they were deemed under s 25(3), Finance Act 1965, to have disposed of and immediately reacquired the assets subject to the declarations. On appeal, the trustees contended that, as on the execution of the declaration of trust they did not become beneficially entitled to the assets in question, they did not become "absolutely" entitled to any settled property and that, in any event, they did not acquire the "exclusive right…to direct" how the assets should be dealt with within the meaning of para 9, Sch 19, Finance Act 1969. For the Crown it was contended that the phrase "absolutely entitled" is not restricted to absolute beneficial entitlement and that on the execution of the declaration of trust the trustees did have the "exclusive right…to direct". The Special Commissioners upheld the Crown's contention and the trustees demanded a Case.
Held, that the expression "absolutely entitled" used in the phrase "absolutely entitled…as against the trustees" did not mean beneficially entitled; and that para 9, Sch 19, Finance Act 1969, did not introduce the requirement that for a person to be "absolutely entitled" he must be beneficially entitled.
(1) Hart (H.M. Inspector of Taxes) v. Briscoe and Others
CASE
Stated under s 56, Taxes Management Act 1970, 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 22 and 23 March 1976 Dr. C. E. Briscoe and others, as trustees of Mrs. L. M. Barne's conveyance of 6 January 1955 (hereinafter called "the Respondents") appealed against an assessment to capital gains tax for 1972-73 in the sum of £25,000.
2. Shortly stated, the question for our decision was whether there was a deemed disposal for capital gains tax purposes on the occasion of an advance made by the Respondents as trustees of one settlement to themselves as trustees of a subsequent settlement made by the same settlor.
3. In addition to the exhibits attached hereto a bundle of correspondence between the Inland Revenue and the Respondents' professional advisers was admitted before us. This bundle is available for inspection by the Court if required.
4. The following facts were admitted between the parties:
-
(i) By a settlement ("the 1955 settlement", attached hereto as exhibit 1(1).) dated 6 January 1955 and made between (1) Lucy Margaret Barne ("the settlor") and (2) trustees: Michael Ernest St. John Barne ("Lieutenant-Colonel Barne") Christopher Robert Birkbeck ("Mr. Birkbeck") and Hugo Daniel Harper provision was made as follows:
(2) By clause 1(i) "the specified class" was defined so as to include the issue for the time being living of the settlor and the spouses, widows, widowers and adopted children for the time being living of any such issue.
(3) By clause 1(ii) "the trust fund" was defined as the residuary or net moneys to arise from any sale under the trust for sale contained in the recited conveyance of 6 January 1955 and the investments for the time being representing the same and any further property investments or money which the settlor might at any time transfer or cause to be transferred to the trustees for the purposes of the settlement and the property investments and money for the time being representing the same and any augmentation thereof and accretions thereto.
(4) By clause 1(iii) "the appointed period" was defined as a period commencing on the date of the 1955 settlement and ending at the expiration of 20 years after the death of the last survivor of the lineal descendants then living of His late Majesty King George the Fifth.
(5) By clause 1(iv) "the accumulation period" was defined (in effect and so far as material) as the period of five years from the date of the 1955 settlement.
-
(6) By clause 6 it was provided that after the expiration of the accumulation period and during the remainder of the appointed period the trustees should pay divide or apply the income of the trust fund (or so much thereof the capital whereof should not have been appointed under the provisions thereinafter contained) to or between or for the maintenance support or benefit of all or any one or more to the exclusion of the other or others of the specified class as the trustees should in their absolute discretion determine.
(7) Clause 7 of the 1955 settlement was in the following terms:
It shall be lawful for the Trustees at any time or times at their absolute discretion to pay or apply the whole or any part or parts of the capital of the Trust Fund to or for the benefit of all or any one or more to the exclusion of the other or others of the specified class freed and released from the trusts concerning the same.
(ii) The 1955 settlement also applied to a life interest of the settlor but that life interest did not form part of the trust fund as defined in the 1955 settlement and the 1972 settlement referred to below does not apply to it.
(iii) Capital gains tax was paid by reason of a deemed disposal on 6 January 1970, as the fifteenth anniversary of the creation of the 1955 settlement, on the property comprised in the conveyance of 6 January 1955 referred to above and on the investments comprised in the trust fund subject to the 1955 settlement.
(iv) The settlor has two children, namely, Dr. Charles Edward Briscoe ("Dr. Briscoe") and Miss Annette Moira Briscoe ("Miss Briscoe") and Dr. Briscoe has three children, namely, Timothy Charles Briscoe ("Timothy") and Anna Nicola Briscoe ("Nicola") both of whom were born on 26 January 1964 and Jonathan Richard Edward Briscoe ("Jonathan") who was born on 29 January 1967.
(v) By the settlement ("the 1972 settlement" attached hereto as exhibit 2(1) ) dated 6 April 1972 and made between (1) the settlor and (2) trustees, Lieutenant-Colonel Barne and Mr. Birkbeck, it was recited that the settlor had paid to the trustees of the 1972 settlement the sum of £1 to be held on the trusts and subject to the powers and provisions thereinafter contained and provision was made as follows:
(2) By Clause 1(a) the "trust fund" was...
To continue reading
Request your trial
-
Craven (HM Inspector of Taxes) v White; Commissioners of Inland Revenue v Bowater Property Developments Ltd; Baylis (HM Inspector of Taxes) v Gregory
... ... Jackson (1956) T.C. 79 ; Fleming v. London Produce Co. Ltd ... (1968) 44 T.C. 582 ; and Hart v. Briscoe (1977) 52 T.C. 53 ... However, I did not derive any great assistance from these ... provisions of the Act make it clear that the purpose was to tax some people and not others in respect of certain transactions and not others, and one can only determine which people and ... ...
-
Eric Scowcroft v The Commissioners for Her Majesty's Revenue & Customs, TC 06525
...in the HMSO Tax Cases report of Hart (H M In spector of Taxes) v Briscoe and Others; Hoare Trustees v Gardner (H M Inspector of Taxes) 52 TC 53. In the All ER report of Fleming, the word is “coverlet”. 26 found the error to be fundamental and so a gross error, but he also said that viewed o......
-
Mr Matthew Chadwick (as trustee in bankruptcy of Mrs Gertrude Oduneye-Braniffe) v The National Crime Agency, TC 06083
...precise issue here, the name of the person assessed. Section 114(1) was briefly discussed in Hart (HM Inspector of Taxes) v Briscoe & others 52 TC 53 where the wrong trustee was assessed in relation to a discretionary trust. In the High Court Brightman J held 30 that the mistake was cured b......
-
Trustees of the Paul Hogarth Life Interest Trust 2008 v The Commissioners for Her Majesty's Revenue & Customs, TC 06757
...and have not put any want of form in issue. But I am also mindful that in Hart 20 (HM Inspector of Taxes) v Briscoe and another (1977) 52 TC 53 counsel for the Inspector felt obliged to inform the High Court that the assessment there had been made on the wrong trustees, and the Court (Brigh......