Mallender (exors of Captain Patrick John Boteler Drury-Lowe dec'd) v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 16 March 2001 |
| Date | 16 March 2001 |
| Court | Chancery Division |
Chancery Division.
Jacobs J.
Christopher Tidmarsh (instructed by the Solicitor for the Commissioners of Inland Revenue) for the Crown.
Shan Warnock-Smith (instructed by Taylor Simpson & Moseley) for the respondant.
The following cases were referred to in the judgment:
Finch v IR Commrs ELR[1985] Ch 1
Deceased Lloyd's name - Provision by deceased of security to Lloyd's in the shape of bank guarantee - Bank guarantee supported by deceased by mortgage of commercial property - Whether such commercial property charged to bank formed "relevant business property" -Inheritance Tax Act 1984 section 104 section 105 section 110 section 112Inheritance Tax Act 1984, ss. 104, 105, 110, 112.
The deceased was a Lloyd's name. His bank gave a guarantee to Lloyd's, which was secured by a charge over commercial property, Denby Disposal Point, that was leased to British Coal. It was charged in 1991, in substitution for an earlier property so charged. The deceased died on 11 July 1993. The Inland Revenue accepted that his activities as a name constituted a business for inheritance tax purposes but denied that the commercial property was relevant business property for the purposes of business property relief.
(1) Whether the commercial property charged by the deceased to his bank constituted "relevant business property" for the purposes of the Inheritance Tax Act 1984.
(2) If so, whether the land was an "excepted asset" withinInheritance Tax Act 1984 section 112s. 112 of the Inheritance Tax Act 1984.
Held, allowing the appeal:
1. An asset was not "relevant business property" if it was not used in a business. This was implicit in Inheritance Tax Act 1984 section 105s. 105 itself, and supported by Inheritance Tax Act 1984 section 110s. 110 which provided that amount of relief was determined by the value of the "assets used in the business (including goodwill)" reduced by certain liabilities. In this case, it was the guarantee, not the land, that was used in the business. How the guarantee was obtained was immaterial. What Lloyd's looked to was the guarantee, not the underlying asset. Accordingly the appeal was allowed.
2. An asset was an "excepted asset" if it was neither used wholly or mainly for the purposes of the business concerned for two years before death nor required for future use. Although the point did not have to be decided, on balance the section seemed to require use of the land itself, not use of the titles to the land.
Jacob J:
1. This is the Crown's appeal from a decision of the 9 November 2000 of Mr THK Everett, special commissioner. He quashed notices of determination served upon the three executors of the late Captain Patrick Drury-Lowe. The notices read as follows:
The Commissioners of Inland Revenue have determined-
in relation to
(a) the deemed disposal for the purposes of inheritance tax on the death on 11 July 1993 of Captain Patrick John Boteler Drury-Lowe ("the Deceased");
(b) the Deceased's business as a Lloyd's Underwriter ("the Business").
that, for the purposes of section 110 Inheritance Tax Act 1984, the net value of the assets used in the Business did not include the value of any part of the interest in land known as Denby Disposal Point, Derby Road, Denby, Derbyshire.
2. The deceased was a Lloyd's name; that is to say he was an underwriter at Lloyd's. To support such a business one has to commit assets to Lloyds ("funds at Lloyd's") in a ratio determined by the amount to be underwritten. A helpful agreed document entitled "Background to Trading as a Name at Lloyd's" describes what is involved. The funds at Lloyd's can only be of a permitted kind. Not all assets of value are permitted, for instance, jewellery and main residences, are not. Bank guarantees, however, can be and are accepted.
3. In this case the deceased owned a parcel of land called the...
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Seymour (Ninth Marquess of Hertford) v Commissioners of the Inland Revenue
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