I am starting to be nervous about where this string, and the previous one to which Malcolm Finney referred, might be taking us.
If, say, HMRC take the view that the residence nil rate will apply even where the proceeds of sale of a property are to be applied to satisfy a legacy to otherwise “qualifying” beneficiaries, where residue is left to non-qualifying beneficiaries, can there be any certainty the courts will adopt a similar view? HMRC insists it does not give legal advice but, by expressing the view as to the availability of the residence nil rate in the situations discussed, it is also giving guidance as to the value of legacies that are defined by reference to the amount that can be transferred without the payment of IHT.
To my mind, this creates a potential trap for those administering wills including such a gift, as such interpretation should apply to all such gifts. Whilst it might be seen as “right” in some cases, it will be manifestly “wrong” in others. A wonderful example of this is the first instance decision in RSPCA v. Sharp (reversed by the Court of Appeal) in which Peter Smith, J. appears to have interpreted the NRB clause on the basis the residuary legatee – the RSPCA – should be more that satisfied with what it received, overlooking the fact that his judgment would apply equally to an estate where residue passed to, say, a widow as it did where a charity was involved.
If an executor administers an estate in ignorance of any HMRC guidance, or decides such guidance creates a manifestly “wrong” situation, they could be at risk of a legal challenge by those who believe they have been disadvantaged. If the executors follow the guidance, despite believing it to be manifestly “wrong” in their case, this could result in an I(PFD)A claim (which might result in judicial guidance on the point).
I am not suggesting that Malcolm Gunn should not discuss this with HMRC - my concern is that we could open a far bigger can of worms than currently exists.