Marshall (Inspector of Taxes) v Kerr
| Jurisdiction | England & Wales |
| Judgment Date | 07 November 1991 |
| Date | 07 November 1991 |
| Court | Chancery Division |
Chancery Division
Before Mr Justice Harman
Capital gains tax - overseas trust - liability on capital payments
The deeming provisions of section 24(11) of the Finance Act 1965 did not apply to prevent a United Kingdom resident settlor of an overseas trust from capital gains tax liability on capital payments made to her by the trustees.
The deeming was to have a limited effect and did not extend to the identification of the settlor of a settlement constituted by a non-resident testator's will and a deed of variation.
Mr Justice Harman so held in the Chancery Division in allowing an appeal by the Crown from a determination of a special commissioner that had discharged estimated assessments to the tax made on the taxpayer, Mr Simon P A Kerr, in respect of capital gains accruing to his wife, Mrs Elizabeth Kerr.
Mrs Kerr's father died in 1977 resident in Jersey. By his will his personal estate was bequeathed to Mrs Kerr, a United Kingdom resident, and her brother in equal shares absolutely. By a deed of family arrangement in 1978 Mrs Kerr settled her share of the estate on Jersey trustees to be held on discretionary trusts for herself and her family.
The administration of the estate was not completed until 1979 and the assets at no time vested in Mrs Kerr. The taxpayer was assessed to capital gains tax under sections 80 to 85 of the Finance Act 1981, gains of non-resident settlements, in respect of capital payments to Mrs Kerr by the settlement trustees between 1981 and 1985.
Section 80 of the 1981 Act applies to impose liability where the settlor "was when he made his settlement domiciled and either resident or ordinarily resident in the United Kingdom".
By section 24(11) of the Finance Act 1965 (see now section 49(6) of the Capital Gains Tax Act 1979): "If not more than two years after a death any of the dispositions of the property of which the deceased was competent to dispose … are varied by a deed of family arrangement … this section shall apply as if the variations made by the deed or other instrument were effected by the deceased, and no disposition made by the deed or other instrument shall constitute a disposal for the purposes of this Part of the Act."
Mr Launcelot Henderson for the Crown; Mr Robert Venables, QC, for the taxpayer.
MR JUSTICE HARMAN said that it was common ground that if Mrs Kerr was deemed not to have been the settlor that the assessments fell to be...
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