Lidher
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 February 2017 |
| Neutral Citation | [2017] UKFTT 153 (TC) |
| Date | 07 February 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0153 (TC)
Judge Anne Redston, Ian Abrams
Mr Jaswinder Singh Flora FCPA, of J&S Associates, appeared for the appellant
Mr Brendan Leyland, of HM Revenue & Customs' Appeals and Reviews Unit, appeared for the respondents
Inheritance tax – Whether a property was in the sole beneficial ownership of the deceased – Whether money in a bank account was jointly owned by the deceased – Whether to allow representative to give oral evidence – Appeal dismissed.
The First-tier Tribunal (FTT) found that a property was in the sole beneficial ownership of the deceased and money in a bank account was jointly owned by the deceased.
Mr Lidher was the sole executor and trustee of the estate of his father, Mr Bahall Lidher who died on 6 March 2007. Mr Lidher filed a short inheritance tax (IHT) account (form IHT205) which stated that his father's assets were made up only of cash (including money in banks, building societies and, or, National Savings) of £275,046. After deducting funeral expenses and debts, his estate was reduced to £261,059, below the nil rate band which applied at that date. In 2008 HMRC wrote to Mr Lidher, stating that it was in possession of information suggesting that his father's estate was in fact above the IHT threshold. Despite many letters and calls from HMRC to Mr Lidher and his representative, Mr Flora, no response was provided to HMRC. In 2010, HMRC required Mr Lidher to complete a full IHT account (IHT400), but this was not supplied. HMRC then requested Mr Lidher to provide information on why a property situated in Southall (the property) had not been included in the IHT205 and to provide details of all his father's bank accounts in sole and joint names. HMRC received no response and in 2011, HMRC issued Mr Lidher with a notice under FA 2008, Sch. 36 to provide the information and, after a final warning, issued a penalty notice for failing to comply with the Sch. 36 Notice. HMRC finally received the IHT400 in 2012.
On 7 August 2013 HMRC made a determination that IHT of £57,532.80 was due following a deemed chargeable transfer on Mr Bahall Lidher's death. Mr Lidher appealed stating that his father:
- had no beneficial interest in an Abbey bank account (the account) which held £102,700 on the date of his death; and
- was not the sole beneficial owner of a freehold property situated in Southall (the property), but instead owned only half of that property.
One of the issues in the appeal was whether Mrs Lidher, Mr Bahall Lidher's wife and Mr Lidher's mother who died in 2006 had died intestate. The FTT held that she had.
Mr Flora submitted that Mrs Lidher was the beneficial owner of half the property although he had no evidence to support her beneficial ownership. The FTT held that the property was in Mr Bahall Lidher's sole name, so there could be no legal presumption that any part of the property was owned by Mrs Lidher. To show that she nevertheless had a beneficial interest in the property it would have been necessary to provide cogent evidence of a common intention constructive trust and there was no such evidence. Mrs Lidher's reported estate did not include the property. The FTT therefore found as fact that the property was owned beneficially as well as legally, entirely by Mr Bahall Lidher. Even if she had owned half the property, her share would have passed automatically to Mr Bahall Lidher on her death, either because the couple were joint tenants or under the law of intestacy. The FTT therefore found that the whole of the property was correctly included in Mr Bahall Lidher's estate.
With regards the bank account, the FTT dismissed Mr Flora's submission that Mr Bahall Lidher had insufficient funds to provide capital in the account but had substantial liquid assets. Also, Mr Flora had previously confirmed that the account was in joint names, and the IHT400 itself stated that the account was jointly owned by Mr Bahall Lidher and Mr Lidher and Mr Lidher's position had only changed after the determination had been issued. The FTT thus concluded that 50% of the account was correctly included in Mr Bahall Lidher's estate. The appeal was dismissed.
The FTT found that Mr Lidher's representative was an unreliable witness, he changed his evidence under cross-examination, made statements which were inconsistent with other accepted facts and some of his evidence was implausible. However, this made little difference to the outcome in this decision as all the facts pointed to no other conclusion than that the money in the bank account was jointly owned and the property was in the sole beneficial ownership of the deceased.
[1] Mr Baldhav Singh Lidher (“Mr Lidher”) is the executor and trustee of the estate of his father, Mr Bahall Singh Lidher (“Mr Bahall Lidher”). Mr Bahall Lidher passed away on 6 March 2007. On 7 August 2013 HM Revenue & Customs (“HMRC”) made a determination that inheritance tax (“IHT”) of £57,532.80 was due following a deemed chargeable transfer as a result of Mr Bahall Lidher's death.
[2] Mr Lidher appealed that determination on the grounds that his father:
- had no beneficial interest in an Abbey bank account (the Account) which held £102,700 on the date of his death; and
- was not the sole beneficial owner of a freehold property situated in Southall (the Property), but instead owned only half of that property.
[3] The burden of proof in this appeal lies on Mr Lidher. Having considered the evidence and heard the parties' submissions, we dismissed the appeal and upheld the determination.
[4] HMRC also charged penalties totalling £6,360 following Mr Lidher's failure to comply with an information notice issued under Finance Act 2008, Sch 36 (“Sch 36”). No appeals against those penalties were before this Tribunal.
[5] Section 1 of the Inheritance Tax Act 1984 (“IHTA”) charges IHT on “the value transferred by a chargeable transfer”. IHTA s 2 defines “a chargeable transfer” as “a transfer of value which is made by an individual but is not … an exempt transfer”.
[6] IHTA s 4(1) provides that:
On the death of any person tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death.
[7] IHTA s 5(1) defines a person's “estate” as “the aggregate of all the property to which he is beneficially entitled”, subject to certain exceptions which are not relevant on the facts of this case.
[8] One of the issues in this appeal is whether Mrs Karam Kaur Lidher (“Mrs Lidher”), Mr Bahall Lidher's wife and Mr Lidher's mother, died intestate. The Administration of Estates Act 1925, s 46(1), read with Schedule 1A to that Act, provides that where a person dies intestate leaving a spouse and issue, the first £250,000 (“the fixed net sum”), together with any personal chattels, passes to the spouse absolutely.
[9] The Tribunal was provided with a bundle of documents prepared by HMRC. They include the correspondence between the parties and between the parties and the Tribunal; Mr Bahall Lidher's will and documents relating to the Account and to the Property.
[10] On 8 December 2015, the Tribunal gave directions for the future conduct of the appeal. Direction 2 read:
Witness statements: Not later than 12 February 2016 each party shall send or deliver to the other party statements from all witnesses on whose...
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