CheckLists.Tax (beta)
Omission to exercise valuable right
Deemed IHT transfer of value
The increase in value of another person's estate does not need to be immediate as long as there is correlation in substance
"[92] I do not consider there is any mandate to import a temporal requirement into the subsection, requiring an immediate temporal link between the reduction in one estate and the increase in the other. There is a correlation of substance between the reduction and the increase, in that one results from the other, but they need not occur at precisely the same time." (HMRC v. Parry [2020] UKSC 35)
Legislation: IHTA s.3(3)
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The omission need not be the sole cause of the increase as long as it is the operative cause
"[94] In this case, the omission yielded the death benefits that, in fact, increased the sons’ estates and I do not see the limited discretion of the scheme administrator as breaking the chain connecting the two events. To say that it did would be to adopt a narrow and legalistic approach to section 3(3) which does not seem to me to be appropriate. Putting it another way, the omission was the operative cause of the increase. As Newey LJ observed (para 109, see para 47 above), it may be that the increase in the sons’ estates could also be said to be brought about “by” the exercise of the administrator’s discretion, but that does not preclude a finding that they were increased “by” the omission." (HMRC v. Parry [2020] UKSC 35)
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IHT transfer of value: no gratuitous intent exclusion
Was the disponor intending, by the overall effect of the disposition, to put the recipient in a better position?
"[61]...I do not think it is appropriate to speak of a disposition having been intended to confer any gratuitous benefit if the recipient of the benefit was intended to receive no more than he would have had in any event. It is necessary, therefore, to ask whether the disponor was intending, by the overall effect of the disposition, to put the recipient in a better position, or, to borrow from what Newey LJ said at para 88, putting things broadly, to ask whether the disposition was being used to improve someone’s position on a gratuitous basis." (HMRC v. Parry [2020] UKSC 35)
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Legislation: IHTA s.10
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Associated operations will taint a transfer if part of and contribute to a scheme intended to confer a gratuituous benefit
"[88]...In Macpherson, the two elements under consideration were linked in the scheme by a common intention - the trustees would not have made the appointment if the variation had not taken place - and the scheme was one intended to confer, and actually conferring, gratuitous benefit on the son by the appointment of the pictures. The variation agreement therefore satisfied Lord Jauncey’s requirements that it “form a part of and contribute to a scheme which does confer … a [gratuitous] benefit” (my emphasis) and is intended to confer a gratuitous benefit. In the present case, the transfer to the PPP and the omission to take lifetime benefits were not, in fact, relevantly linked in a scheme. The omission had already been decided upon whilst the funds were in the section 32 policy and the sons could have benefitted from it without any move to the PPP. Moving the funds from one policy to the other (the “transfer”, focused upon by the Notice) was not a contributory part of the scheme to confer gratuitous benefit on the sons; it was a step taken solely to ensure that Morayford could not benefit, as the FTT were entitled to find on the very unusual evidence in this case. The omission and the transfer were not therefore, in my view, relevantly associated." (HMRC v. Parry [2020] UKSC 35)
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Legislation: IHTA s.10, s.268
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