While we patiently await the review from the Office of Tax Simplification in relation to Inheritance tax, the Courts have ruled against HMRC in a case relating to Business Property Relief.
The estate of the late Maureen Vigne was the estate in questions. The estate included a livery business in Buckinghamshire. HMRC argues that is should be considered a holding investment and it was not engaged in high levels of economic activity. HMRC failed to prove this at the Tribunal and it was held that the property was eligible for Business Property Relief.
The outcome of this case will have important implications for the livery and equine sections, the agricultural sector and potentially for those who rent of fully furnished holiday lets. By highlighting high levels of economic activity with these assets estates could save thousands in inheritance tax.
It also comes at a time where Inheritance Tax is in question. The Office of Tax Simplification have been asked to review Inheritance Tax in an attempt to help simplify the increasingly complicated tax. When the review was announced many suspected that Agricultural Property Relief and Business Property Relief could be the main targets of this simplification, with a risk that they may remove the relief completely. In light of the above ruling, are HMRC more likely to want to change the rules in relation to these reliefs? We will now have to wait and see.
Contesting a Will under the Inheritance (Provision for Family and Dependants) Act 1975
For a number of reasons many clients do not want certain members of their family to benefit from their estate when they die, but under the Inheritance (Provision for Family and Dependants) Act 1975 if certain people are not provided for within a Will they can make a claim against the estate.
Under the Act the Court can vary the distribution of the deceased estate to make reasonable financial provision for their spouse, cohabitee, children or a person who is financially dependant on them at the time of their death. In the last few years we have seen the case of Ilott v Mitson UKSC 17  2 WLR 979. Although this case has continued for a number of years we were first reading about it in 2015, It was appealed again and the Supreme Court finally brought the matter to a close on 15th March 2017.
The facts of the case are relatively simple, and one many families will recognise. The deceased was estranged from her daughter after her daughter left home in 1978 to move in with a man she later married, a man the deceased disapproved of. When the deceased made her will she left clear instructions that her executors were to fight any claim from her daughter and that she saw no reason why her daughter should benefit from her estate. She deceased left her entire estate to animal charities.
After her death the daughter applied to the Court under the act. The Court at first instance awarded her £50,000.00, on the basis the daughter had been unreasonably excluded. Daughter appealed and sought more money from the estate. After many changes to the daughters award, including a reversal to award any money and then a higher amount being given, the Supreme Court has finally ruled that the daughter is to be awarded the original £50,000.00
In context the deceased estate was worth in excess of £400,000.00 and therefore daughter has not received the lion’s share of the estate. However, the deceased was clear in her wishes, yet the Court has ruled against these. So, if you want to exclude a person from benefitting from your estate, what can you do?
We would always advise our clients that they not only explain why they do not want a person to benefit but the reason why others should benefit instead. Foxing on the positives of why the chosen beneficiaries are to receive instead of the negatives as to why people are not to receive is important. We do not prepare these letters for our clients, but we will work with them to ensure we are providing them with the best possible defence when it comes to an unwanted claim.
In addition to this there are important lessons to be learnt from Ilott v Mitson. The daughter was on state benefits, and there are views that her situation did influence the Court in its decision. Further the charities chosen as beneficiaries were not closely linked to the deceased. She has no great ties with them, so potentially no strong reason for choosing them over her daughter.
We are not able to prevent a 1975 Act claim, but we can help you write your Will and supporting documentation to help defend your estate should a claim be made. If you would like more information please do not hesitate to contact our friendly team on 01522 282 500.