Jones and Another (Administrators of the Estate of Balls Deceased) v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 14 February 1997 |
| Date | 14 February 1997 |
| Court | Chancery Division |
Chancery Division.
Lightman J.
David Parry (instructed by Ellison & Co, Colchester) for the plaintiffs.
Michael Furness (instructed by the Solicitor of Inland Revenue) for the Crown.
The following case was referred to in the judgment:
Charter Reinsurance Co Ltd v Fagan [1996] CLC 977
Inheritance tax - Relief - Administrators entered into contract for sale of freehold interest in property which formed part of deceased's estate - Contract not completed - Property not sold within three years of testator's death - Property subsequently sold - Whether administrators were entitled to claim relief - Whether value of property for inheritance tax purposes was price agreed by sale contract or probate value - Inheritance Tax Act 1984 article 191Inheritance Tax Act 1984, s. 191.
This was an appeal by the administrators of an estate against the Revenue's decision that, for the purposes of inheritance tax, the value of the freehold interest in a property which formed part of the deceased's estate was not the price agreed by a contract for the sale of the property but was the probate value.
In June 1988 the deceased died owning a property valued for probate purposes at £477,000. In June 1991, the deceased's son as administrator of the estate entered into a contract to sell the property for £300,150 (the "1991 contract"). Although notice to complete was served on the purchaser the contract was subsequently either rescinded or treated as discharged and the deposit was forfeited. After the deceased's son's death the plaintiffs became the administrators and in January 1992 they entered into a contract to sell the property for £400,000 which was duly completed. In May 1995 it was agreed that the probate value was £447,000.
The plaintiffs claimed that they were entitled to claim relief under theInheritance Tax Act 1984 article 191Inheritance Tax Act 1984, s. 191 whereby the value, for the purposes of inheritance tax, of an interest in land "sold" within three years of the date of the death was its sale value. The plaintiffs appealed directly to the High Court against the Revenue's determination that they were not entitled to relief and that therefore the value was the probate value and sought a declaration that the value of the freehold interest in the property was the sale price agreed in the 1991 contract. The plaintiffs contended that although the 1991 contract had not been completed it had amounted to a "sale" which had been made within three years of the death of the owner and that accordingly the value of the property for inheritance tax purposes was the sale price agreed in the 1991 contract of £300,150.
Held, dismissing the plaintiff's appeal:
The focus in Inheritance Tax Act 1984 article 190ss. 190-198 of the Act was on the interest being "sold" and thus a sale was the precondition to any relief. Although under the 1991 contract the equitable title had passed because the contract had been legally enforceable, in the context of Inheritance Tax Act 1984 article 190ss. 190-198 "sold" meant "conveyed or transferred on completion of a sale". Therefore the sale contemplated by the section was of the legal title on completion.
In this action, the plaintiffs as the personal representatives of the late William Robert Balls ("the deceased"), seek a declaration that the value of the freehold interest in Brook Farm, West Bergholt, Colchester, Essex ("the property") forming part of the deceased's estate was and is for the purposes of the Inheritance Tax Act 1984Inheritance Tax Act 1984 ("the Act") the sale price agreed by a contract for the sale of the property made on 25 June 1991 ("the 1991 contract"). The 1991 contract was never completed. The issue turns on the true construction of Inheritance Tax Act 1984 article 191s. 191 ("the section") of the Act which (so far as is material) provides that where "a sale" is made within three years of the death of the owner of an interest in land the value of that interest shall be taken to be the sale price. The plaintiffs contend that for the purpose of the section the entry into the 1991 contract was such a sale. The defendants, the Commissioners of Inland Revenue ("the Revenue"), contend that what is required is a completed sale: a contract which proves abortive is not such a sale.
The Deceased died on 26 June 1988 owning the property, which was valued for probate purposes at £477,000. On 14 December 1988, letters of administration to his estate were granted to his son Brian Williams Balls ("Mr BW Balls"). On 25 June 1991, Mr BW Balls as such administrator entered into the 1991 contract to sell the property for £300,150. The contractual completion date was 25 July 1991. Mr BW Balls served notice to complete on the purchaser and on 22 August 1991 either rescinded the 1991 contract or treated it as discharged and forfeited the deposit. Mr BW Balls died on 2 September 1991 and on 23 December 1991 letters of administration of all the unadministered estate of the deceased were granted to the plaintiffs. On 28 January 1992 the plaintiffs entered into a...
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