Warren's Trustees v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 07 July 1928 |
| Date | 07 July 1928 |
| Docket Number | No. 92. |
| Court | Court of Session |
Lord Fleming, Lord President (Clyde), Lord Sands, Lord Blackburn, Lord Morison.
RevenueEstate-dutyRelief in respect of quick succession to a businessTrust-estate including a businessDirection to trustees to sell businessBequest of residue to daughter in liferent with fee to her on attaining twenty-fiveDeath of daughter eight days after testator before attaining twenty-five and before business soldWhether relief dueFinance Act, 1914 (4 and 5 Geo. V. cap. 10), sec. 15.
The Finance Act, 1914, enacts, by sec. 15, that, where estate-duty has become payable on any property consisting of a business or any interest in a business passing on the death of any person, and within five years estate-duty has again become payable on the same property passing on the death of the person to whom the property passed on the first death, the amount of estate-duty payable on the second death in respect of the property so passing shall be reduced.
The proprietor of a wine and spirit business, by his trust-disposition and settlement, directed his trustees to convey the residue of his estate to his only daughter on her attaining twenty-five years of age, with a destination-over in the event of her predeceasing the period of conveyance, and to pay her the income of the residue until that date. He directed his trustees to sell the business. The daughter died eight days after the testator, under the age of twenty-five, and before the direction to sell had been implemented. The trustees having claimed a reduction, under section 15 of the Finance Act, 1914, of the estate-duty payable on the daughter's death, in so far as assessable on the value of the business, the Commissioners of Inland Revenue refused the claim.
In an appeal, held (diss. Lord Morison, rev. judgment of Lord Fleming) that section 15 applied, in respect that the beneficial possession and enjoyment of the residue, including the business, had passed to the daughter on the testator's death, and had again passed on her death; and that the trustees were, accordingly, entitled to the relief claimed.
On 1st November 1927 Robert George Warren and others, the trustees and executors of Thomas Thorburn Warren, wine and spirit merchant, Glasgow, presented a petition of appeal under the Court of Exchequer (Scotland) Act, 1856,1 the Finance Act, 1894,2 section 10, and relative Acts, and the Codifying Act of Sederunt, 1913, C. viii. 4, against a decision of the Commissioners of Inland Revenue refusing to allow a deduction, under section 15 of the Finance Act, 1914,* from estate-duty amounting to 2113, 2s.,
being part of the estate-duty payable on the death of Miss Margaret Gladys Bain Warren. The petitioners claimed a deduction of 1056, 11s., being 50 per cent of the said duty. The duty in respect of which a deduction was claimed was assessed on the value of the wine and spirit business carried on by the late Thomas Thorburn Warren, which was valued for estate-duty purposes at 19,210, 0s. 7d.
The prayer of the petition was in the following terms:To recall the assessment complained of, to find that the sum of 19,210, 0s. 7d., in respect of which the petitioners have been twice assessed for estate-duty, represents the value of property consisting of a business, or an interest therein, within the meaning of section 15 of the Finance Act, 1914, and that the petitioners are entitled to relief to the extent of 50 per cent of the duty paid by them on the said property passing on the death of the said Miss Margaret Gladys Bain Warren, with the proportion of interest applicable thereto.
The petition set forth:(2) The said Thomas Thorburn Warren died on 2nd March 1925. He was predeceased by his wife, but was survived by his only child Margaret Gladys Bain Warren, who was twenty-two years of age. The said Margaret Gladys Bain Warren died unmarried on 10th March 1925having survived her father by only eight days. (3) Under his said trust-disposition and settlement the said Thomas Thorburn Warren directed his trustees to pay to his daughter the said Margaret Gladys Bain Warren the whole income of the residue of his means and estate until she should attain twenty-five years of age.* Had Miss Warren survived her twenty-fifth birthday she would then have become entitled to the fee of the said residue under her father's will, but in the event which happened the fee passed on her death to certain beneficiaries named by Mr Warren in his said trust-disposition and settlement. (4) Estate-duty at the rate of 11 per cent, and amounting, exclusive of interest, to 6457, 10s. 11d., was payable, and has been paid, on the estate which passed on Mr Warren's death, and other estate-duty on the same estate became payable eight days thereafter, on the death of Miss Warren. (5) Mr Warren's estate consisted of, inter alia, the business of T. Warren & Sons, wine and spirit merchants, Glasgow, of which he was the sole proprietor at the time of his death, but which he had contracted to sell as at 28th May 1925. The net value of the business as given up in the inventory of his estate was 19,210, 0s. 7d., and estate-duty at the rate of 11 per cent was paid thereon by the petitioners in respect of the passing of this property on his death. The petitioners have been assessed for estate-duty at the same rate in respect of the passing of this property (valued at the same amount) on the death of Miss Warren. The petitioners, however, maintain that, as the
property in question consisted of a business, or an interest therein, and as Miss Warren, being the person to whom the property passed on the first death, died within one year of her father's death, they are entitled, by virtue of section 15 of the Finance Act, 1914, to quick succession relief to the extent of 50 per cent of the duty payable thereon. (6) Estate-duty at the rate of 11 per cent on the value of the said business amounts, exclusive of interest, to 2113, 2s. The relief claimed by the petitioners (50 per cent of the duty) is accordingly 1056, 11s., together with the proportion of interest applicable thereto. (7) As the Registrar refused to grant the relief claimed by the petitioners, they appealed against his decision to the Commissioners of Inland Revenue, in accordance with the provisions of the Finance Act, 1894. (8) The Commissioners, having considered the appeal, intimated on 8th October 1927 that they had determined to sustain the decision of the Registrar, and to maintain the assessment in question without granting the relief claimed by the petitioners. (9) The petitioners have accordingly made payment of the full amount of the assessment, such payment being a condition precedent to their right to appeal. They feel aggrieved, however, by the decision of the Commissioners and humbly submit this petition for review of their finding. (10) The grounds of the present appeal, are:That Mr Warren died possessed of the said business, or an interest therein, and that it was this business, or an interest therein, which passed to Miss Warren on Mr Warren's death, and on which duty again fell to be paid on the death of Miss Warren; that the sale of the business was subject to a suspensive condition pending the granting of a licence to the purchasers at the April Licensing Court; that, in any event, the sale did not take effect until 28th May 1925; and that the property which passed on the deaths of Mr Warren and Miss Warren was the business of T. Warren & Sons, or an interest therein, and was not merely a right to the purchase-price thereof.
Answers to the petition were lodged by the Lord Advocate, as representing the Commissioners of Inland Revenue. The answers contained, inter alia, the following averments: Explained that Mr Warren in the fourth place desired his trustees to discontinue his said business, and directed them to sell or realise it and the whole property and assets thereof, if not already realised by himself, to any person or persons as soon after his death as they in their own absolute discretion might think advisable. Denied that the said business or an interest therein passed to Miss Warren or that the petitioners have been assessed to estate-duty in respect of its passing on her death. Explained that estate-duty was paid on the death of Miss Warren on the aggregate of the net moveable estate of Mr Warren, less estate-duty, legacies, &c., paid on his death. Denied that the petitioners are entitled to the relief sought for. The respondent maintains that the said Mr Warren having given an absolute direction to his trustees to sell and realise the said business, on the assumption that no sale of the business took place until 28th May 1925, conversion into money took place for the purposes of succession a morte testatoris; that, in consequence, neither the business nor an interest therein passed to Miss Warren; further maintains that the rights of Miss Warren, under Mr Warren's trust-disposition and settlement, being those of a residuary legatee, no interest in any specific part of his estate or in the income thereof passed to her upon his death; that in these circumstances the provisions of section 15 of the Finance Act, 1914, do not apply; and that the grounds of appeal being unsound in law the prayer of the petition should be refused.
On 17th January 1928 the Lord Ordinary in Exchequer Causes (Fleming) refused the prayer of the petition.
Lord Fleming'sopinion.The late Mr Thomas Thorburn Warren was the sole proprietor of the business of T. Warren & Sons, wine and spirit merchants, Glasgow. Mr Warren, who was a widower, died on 2nd March 1925, survived by an only daughter, who died on 10th March, having survived her father by only eight days. Under his trust-disposition and settlement Mr Warren directed his trustees to pay to his daughter the whole income of the residue of his means and estate until she should attain twenty-five years of age, at which time she was entitled to the...
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