HMRC are still attempting to argue that the effect of an inter vivos gift of the nue-propriété over French land is a settlement because the asserted outcome,is “comparable”, but they admit that it is not identical to a settlement under English law which should be the law to which they are referring under s.43(2) ITA 1984. The whole issue of the application of s.43(2) ITA 1984 paragraph 2 to other items than movables has been the result of such badly thought through fiscal exceptions evolving into quasi- legal principles.
The issue of when the statutory dévolution talks place under French reserved heirship rules of a usufruit to the surviving spouse and the nue-propriété to the issue of their marriage is one thing, it clear that that cannot be a “disposition” and therefore falls outside the second paragraph of s.43(2) ITA 1984, despite other colleagues’s opinions to the contrary. A devolution in plain legalese - if not English - is a devolution, by law.
The wording of paragraph 2. s.43(2) ITA 1984 is quite precise, it is not general, it states that in order to fall within the “scope” of the second paragraph the disposition needs to be a settlement were it regulated, as distinct from governed, by the law of any part of the United Kingdom. Generally this terminology was used in Estate Duty times and had to be taken as a reference to domicile and movables as the jurisdiction and law of any part of the United Kingdom can only be applied to movables abroad, unless both partes are domiciled and amenable to the jurisdiction of the, here, English courts.
However, in relation to lifetime dismemberments HMRC’s “outcomes” argument falls at the first fence in relation to foreign land. Why? Because s. 53 LPA 1925 states that any equitable interest over land, in the form of a settlement, can only take place by an express provision of that equitable interest in a deed. Has anyone recently attempted to convince a French notary, or for that matter the French cadastre to create an “equitable” interest over a French land?
There is also a technical issue with that position. No inter vivos gift in advance of a reserved inheritance in France is worded so as to create any equitable interest in the land. The usufruit is retained as a legal right in rem , not as an equitable interest. Also the express advance on an inheritance under English law takes place as a gift, not as a settlement. A “settlement” is not an advance. The presumption of advancement, which is still good law, relies upon that basic tenet on the basis that a parent gratifying a child ifs giving them an advance on their inheritance. That is what generally is described in a French notarised dismemberment as an avance d’hoirie or similar.
It is exactly what it states on the box.
Peter Harris
Overseas Chambers