Will v Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 05 June 1980 |
| Docket Number | No. 27. |
| Date | 05 June 1980 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION.
TrustLife assurance policy by married man on his life for the benefit of his childrenPolicy effected under the Married Women's Policies of Assurance (Scotland) Act 1880 (cap. 26)No express reference to incomeWhether possibility that income might ariseWhether in terms of trust such income would be accumulated.
RevenueEstate dutySettled propertyLife assurance policy by married man on his life for the benefit of his childrenPolicy effected under the Married Women's Policies of Assurance (Scotland) Act 1880 (cap. 26)No express reference to incomeNo income in fact during his lifeWhether property settled property "held on trust to accumulate" in terms of Finance Act 1894 (cap. 30), sec. 2 (1) (b) (iv) as substituted by Finance Act 1969 (cap. 32), sec. 36 (2).1
On 4th August 1954 a married man ("the truster") took out a policy of assurance on his own life. The policy bore to be effected under the Married Women's Policies of Assurance (Scotland) Act 1880. The sum assured was payable on the truster's death with participation in profits. The beneficiaries were primo loco his son, whom failing his two daughters or the survivor of them. The payees were described as "the person or persons entitled under the Married Women's Policies of Assurance (Scotland) Act 1880 to receive the policy moneys." The policy contained non-forfeiture regulations, which are set out in full in the text of this report. Further on 4th August 1954 the truster took out two additional life policies which were identical to the first policy, except that the second policy was for the benefit of one daughter whom failing his son and other daughter, and the third policy was for the benefit of his other daughter, whom failing the son and daughter.
The truster died on 22nd December 1971, survived by all three children. The capital transfer taxes office claimed estate duty on the
policy proceeds in terms of sec. 2 (1) (b) (iv) of the Finance Act 1894 as substituted by sec. 36 (2) of the Finance Act 1969. The executors disputed liability for estate dutyHeld (1) that there were conceivable circumstances not too remote or fanciful in which income could have arisen under the trust.
(2) That, in terms of the trust, such income would have had to be accumulated.
(3) That accordingly the proceeds of each policy constituted property on which estate duty was exigible on the death of the truster in terms of sec. 2 (1) (b) (iv) of the Finance Act 1894; and appealdismissed.
The Royal Bank of Scotland Ltd. v. Lord AdvocateSC1977 S.C. 116followed.
Ronald Kerr Will, d.k.s., Robert Quentin Charles Stevenson, and Mrs Helen Rhoda Laura Stevenson or Shepherd, the executors of the deceased David Alan Stevenson, appealed to the Court of Session under section 10 of the Finance Act 1894 against assessments dated 17th January 1979 made by the Commissioners of Inland Revenue under the Finance Act 1894, section 2 (1) (b) (iv), as substituted by the Finance Act 1969, section 36 (2).
The grounds of appeal set forth: (1) "David Alan Stevenson who last resided at 22 Glencairn Crescent, Edinburgh (hereinafter referred to as the deceased) died on 22nd December 1971 leaving a will dated 30th May 1967. (2) On 4th August 1954 the deceased who was a married man effected a policy of assurance (No. 373422) on his own life with the Commercial Union Assurance Company Limited The sum assured (2,000 with participation in profits) was payable on the death of the deceased (therein referred to as the assured). Said policy bore to be effected under the provisions of the Married Women's Policies of Assurance (Scotland) Act 1880 and was expressed to be for the benefit of the following persons:(a) The assured's son Robert Quentin Charles Stevenson if he shall survive the assured, (b) If the said son predecease the assured for the benefit of such of the assured's daughters Helen Rhoda Laura Stevenson or Shepherd and Margaret Joyce Beryl Stevenson or Will as shall survive the assured and if more than one in equal shares, (c) If all the said persons predecease the assured then for the absolute benefit of the last to die of the said three persons. Appended to said policy of assurance were Non-Forfeiture Regulations in the following terms:If after a Policy has acquired a Surrender Value, the Premium be not paid within the 30 days of grace allowed for payment, the Policy will be maintained in force for the full Sum Assured (subject to deduction of the overdue Premium or Premiums with Interest thereon at the rate of 5 per cent per annum) for a period of 12 months from the due date of the first overdue Premium, provided the Surrender Value as at the end of this period (after deduction of any existing charge in favour of the Company) be of sufficient amount to provide the arrears of Premium and Interest. After 12 months the Policy will be converted to a Paid-up Policy without Profits for such amount as the balance of Surrender Value, after deduction of the arrears of Premium and Interest, and any existing charge in favour of the Company, will secure. If the Surrender Value be not of sufficient amount to maintain the Policy in force for 12 months, it will be applied to maintain it for such shorter period than 12 months as the magnitude of the Surrender Value permits. At any time during the period for which, under the above regulations, the Policy is automatically maintained in force for the full Sum Assured, the arrears of Premium and Interest may be paid off, and the Assurance continued for the full amount in the future. As, under the above regulations, the Premium for the extension of the Assurance is provided out of the Surrender Value, it follows that, if the payment of Premium be discontinued, and it is desired to obtain the maximum Surrender Value or Paid-up Policy, application must at once be made to the Company. (3) The persons entitled under said policy to payment of the sum assured with profits (the payees) were described as the person or persons entitled under the Married Women's Policies of Assurance (Scotland) Act, 1880 to receive the policy monies. By Section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880 it is providedA policy of assurance effected by any married man on his own life and expressed upon the face of it to be for the benefit of his children shall together with all benefit thereof be deemed a trust for the benefit of his children ; and such policy immediately on its being so effected shall vest in him and his legal representatives in trust for the purpose or purposes so expressed Said policy accordingly vested in the deceased and his executors of whom the appellants are those presently acting. After the deceased's death the amount paid to his executors in respect of said policy was 3,469.17. The deceased's son Robert Quentin Charles Stevenson (who is the second-named appellant) survived his father and the appellants accordingly hold said sum in trust for him. The whole terms of said policy of assurance are printed in the Appendix hereto. (4) On the same date (4th August 1954) the deceased effected two further policies of assurance on his own life with the said Commercial Union Assurance Company Limited (No. 373423 and 373424). Said policies were in identical terms to the said policy No. 373422 save that in the case of policy No. 373423 the persons for whose benefit the policy was effected were as follows:(a) The assured's daughter Margaret Joyce Beryl Stevenson or Will if she shall survive the assured. (b)If the said daughter predecease the assured for the benefit of such of the assured's son Robert Quentin Charles Stevenson and a daughter Helen Rhoda Laura Stevenson or Shepherd as shall survive the assured and if more than one in equal shares. (c) If all the said persons predecease the assured then for the absolute benefit of the last to die of the said three persons'; and in the case of policy No. 373424 the persons for whose benefit the policy was effected were as follows:(a) The assured's daughter Helen Rhoda Laura Stevenson or Shepherd if she shall survive the assured. (b) If the said daughter predecease the assured for the benefit of such of the assured's daughter Margaret Joyce Beryl Stevenson or Will and son Robert Quentin Charles Stevenson as shall survive the assured and if more than one in equal shares. (c) If all the said persons predecease the assured then for the absolute benefit of the last to die of the said three persons. Both the said Mrs Will and the said Mrs Shepherd (who is the third named appellant) survived the deceased. The same sum (3,469.17) was paid by the said assurance company to the deceased's executors under each of said policies and said sums are likewise held by the appellants in trust for the said Mrs Will and the said Mrs Shepherd respectively. (5) It is claimed by the Capital Taxes Office that Estate Duty is payable on the settled proceeds of each of said policies under Section 2 (1) (b) (iv) of the Finance Act 1894 as substituted by Section 36 (2) of the Finance Act 1969. In consequence the Capital Taxes Office claims Estate Duty in respect of each of said sums of 3,469.17 amounting in each case to 1,923.57 together with interest thereon at 3% from 22nd December 1971 to 30th September 1975 and at 6% from 1st October 1975 to 17th March 1978 amounting to 501.34. (6) The appellants deny that Estate Duty falls to be assessed upon the values of any of said policies or the respective proceeds thereof. The appellants contend in the case of each of said policies of assurance as follows:(1) That the policy of assurance held in trust at the date of the deceased's death was not property of such a nature as might produce income; (2) That the trust upon which that policy of assurance was held made no provision either expressly or by implication for the accumulation of any income from the policy; (3) That in any event, any income arising under that trust would not fall to be...
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Stevenson's Executors v Inland Revenue
...The Royal Bank of Scotland Ltd. v. Lord AdvocateSC 1977 S.C. 116 approved. (In the Court of Session, sub nom. Will v. Inland Revenue—1980 S.C. 288.) Ronald Kerr Will, D.K.S., Robert Quentin Charles Stevenson, and Mrs Helen Rhoda Laura Stevenson or Shepherd, the executors of the deceased Dav......