Minden Trust (Cayman) Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 21 June 1985 |
| Date | 21 June 1985 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal.
Mr. John Knox Q.C. and Mr. Michael Hart (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. Donald Rattee Q.C. and Mr. Christopher McCall (instructed by Messrs. Cuney & Co.) for the trustees.
Before: Oliver, Parker and Nourse L.JJ.
Capital transfer tax - Capital distribution - Excluded property - Beneficiary domiciled and ordinarily resident outside UK - Government securities tax exempt while owned by foreigners - Creation of interest in possession in exempt government securities - Property previously comprised in settlement with beneficiaries domiciled and ordinarily resident in UK - Whether securities excluded property - Whether two settlements to be treated as one - Finance Act 1975 schedule 5 subsec-or-para 1 schedule 5 subsec-or-para 6 schedule 5 subsec-or-para 11 schedule 5 subsec-or-para 11Finance Act 1975, Sch. 5, para. 1, 6(2), 11(4), (11); Finance Act 1975 schedule 7 subsec-or-para 3Sch. 7, para. 3(2).
This was an appeal by the Crown from a decision of Warner J. ([1984] BTC 8071) in proceedings brought to determine the validity of a claim that settled property which consisted of exempt government securities was excluded property for capital transfer tax purposes within Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) of Sch. 7 to the Finance Act 1975.
The settlor, a UK resident made two settlements for the benefit of her family and remoter issue. The first, made in 1961, included a class of beneficiaries domiciled and ordinarily resident in the UK. No distribution was made from that settlement. On 10 February 1978 a further settlement was made. The beneficiaries were members of an "appointed class" not resident in the UK. On expiry of the accumulation period the income was to become payable to Lady Iveagh, a non resident. On 7 March 1978 the trustees passed a resolution transferring some of the assets in the 1961 settlement including Treasury 101/2% Stock to the 1978 settlement. A deed was executed, the effect of which was to accelerate the vesting in possession of Lady Iveagh's interest under the 1978 settlement, and to do so at a time when, in terms of Finance Act 1975 schedule 5 subsec-or-para 6Sch. 5, para. 6(2) to the Finance Act 1975, no interest in possession subsisted in the property of the settlement. Thus, by virtue of Finance Act 1975 schedule 5 subsec-or-para 6para. 6(2) a capital distribution would be treated as made. On that basis the Revenue served notices of determination of the tax payable. The trustees argued that they were exempt from tax because the effect of Finance Act 1975 schedule 5 subsec-or-para 11 schedule 7 subsec-or-para 3Schs. 5, para. 11(11) and 7, para. 3(2) to the 1975 Act was that the stock was "excluded property". Warner J. in the High Court accepted the trustees' argument and the Revenue appealed to the Court of Appeal.
The Crown contended that the requirement in Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) that all known beneficiaries for whom the settled property or income from it might be applied were neither domiciled nor ordinarily resident in the UK was not satisfied. In the circumstances the settled property specified inFinance Act 1975 schedule 7 subsec-or-para 3para. 3(2)was all the property comprised in the 1961 settlement.
The trustees contended that the settled property in Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) was limited to the exempt securities, any property which they represented at the material time and any property which thereafter represented them. Alternatively, even if the settled property included all other property from time to time held on trusts of the settlement in question, that settlement was nevertheless identified as the 1978 and not the 1961 settlement.
Held, dismissing the Crown's appeal:
1. The Revenue's argument that a special meaning should be given to "settled property" by virtue of Finance Act 1975 schedule 5 subsec-or-para 11Sch. 5, para. 11(4) to Finance Act 1975 was rejected. It was clear from the terms of Finance Act 1975 schedule 5 subsec-or-para 11Sch. 5, para. 11(11) that settled property there had a different meaning from Finance Act 1975 schedule 7 subsec-or-para 3Sch. 7, para. 3(2) and thereforeFinance Act 1975 schedule 5 subsec-or-para 11para. 11(11) could not apply to Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2). That meant that Finance Act 1975 schedule 5 subsec-or-para 11para. 11(4) could not apply to it either.
2. In the absence of any special requirement that the words "settled property" in Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) should have an unnatural meaning they referred only to property comprised in the 1978 settlement. Therefore, the securities were excluded property and Finance Act 1975 schedule 5 subsec-or-para 6para. 6(2) did not apply to them. Consequently there was no charge to tax.
The Crown appealed against an order by Warner J.
By Notice of Appeal dated 22 May 1984, the Crown appealed on the grounds that:
1 The judge was wrong in law in holding that the property comprised in the said Appointment ("the Appointed Property") was excluded property by virtue of Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) of the Seventh Schedule to the Finance Act1975.
2 The Appointed Property was not excluded property because on the true construction of the said Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) in its application to the facts of this case the words "the settled property" refer to the property for the time being comprised in a Settlement ("the 1961 Settlement") made by Veronica Mary Tritton on 30 March 1961, and the judge erred in holding them to refer to the property for the time being comprised in a settlement constituted partly by the 1961 Settlement and partly by a resolution of the trustees thereof dated 7 March 1978.
3 Alternatively if (contrary to the defendants' contentions in para. 2 hereof) the judge was right in his construction of the said words "the settled property" in the said Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) he further erred in rejecting the defendants' alternative contention that on the true construction of the Fifth Schedule to the Finance Act 1975, Finance Act 1975 schedule 5 subsec-or-para 11para. 11(4) thereof applies for the interpretation of (inter alia) the said Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) of the Seventh Schedule thereof with the result that the Appointed Property should be treated as remaining comprised in the 1961 Settlement.
Oliver L.J.: I ask Nourse L.J. to deliver the first judgment.
Nourse L.J.: This is an appeal by the Crown from a decision ofWarner J. given on 17 April 1984 in proceedings brought to determine the validity of a claim for capital transfer tax on settled property. Shortly stated, the question in issue is whether the settled property, which consisted of exempt government securities, was excluded property within Finance Act 1975 schedule 7 subsec-or-para 3para. 3(2) of Sch. 7 to the Finance Act 1975.
The material facts and the important parts of the material documents are fully stated in the judgment of Warner J., which is reported at [1984] BTC 8071. It is therefore only necessary for me to summarise them...
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